(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 orOR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Delaware | 74-1871327 | |||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||
11500 North MoPac Expressway Austin, Texas | 78759 | |||
(address of principal executive offices) | (zip code) |
Title of Each Class | Name of Each Exchange on Which Registered | |||
Common Stock, $0.01 par value | The NASDAQ Stock Market, LLC |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X]T No [ ]
£
T
£
T
T
Instrument
Services
In
other software environments.
. We offer fee-based training classes and self-paced course kits for many of our software and hardware products. On-site courses are quoted per customer requests.requests and we include on-line course offerings with live teachers. We also offer programs to certify programmers and instructors for our products.
)
Certain of our competitors have substantial competitive advantages in terms of breadth of technology, sales, marketing and support capability and resources, including the number of sales and technical personnel and their ability to cover a geographic area and/or particular account more extensively and with more complete solutions than we can offer, and more extensive warranty support, system integration and service capabilities than those we have. In addition, large competitors can often enter into strategic alliances with our key customers or target accounts, which can potentially have a negative impacteffect on our success with those accounts.
operating results.
· | new product introductions by competitors; |
product |
· | the impact of foreign exchange rates on product pricing; |
· | quality and performance; |
success in developing new products; |
adequate manufacturing capacity and supply of components and materials; |
efficiency of manufacturing operations; |
effectiveness of sales and marketing resources and strategies; |
strategic relationships with other suppliers; |
timing of our new product |
protection of our products by effective use of intellectual property laws; |
the outcome of any material intellectual property litigation; |
· | the financial strength of our competitors; |
· | barriers to entry imposed by competitors with significant market power in new markets; |
· | general market and economic conditions; and, |
Although we operate in a highly competitive market, we believe we compete favorably with respect to these factors of competition.
performance characteristics.
We obtain most
See“Our Business is Dependent on Key Suppliers” at page 14 for additional discussion of the risks associated with limited source suppliers.
As of December 31, 2006,2009, we had 4,1495,120 employees worldwide, including 1,1221,457 in research and development, 1,8792,338 in sales and marketing and customer support, 674755 in manufacturing and 474570 in administration and finance. None of our employees are represented by a labor union and we have never experienced a work stoppage. We consider our employee relations to be good. For eighteleven consecutive years, from 1999 to 2006,2009, we have been named among the 100 Best Companies to Work for in America according toFORTUNE magazine.
additional marketing costs for new product introductions and/or for conferences and tradeshows; |
increased costs from hiring more product development engineers or other personnel; |
additional costs |
additional costs associated with the expiration of temporary cost cutting measures, such as salary reductions, implemented in 2009; |
· | increased manufacturing costs resulting from component supply shortages and/or component price fluctuations; |
increased component costs resulting from vendors increasing prices in response to increased economic activity; |
· | additional expenses related to intellectual property |
· | additional costs related to acquisitions, if any. |
· | burdens of complying with additional and/or more complex VAT and customs regulations; and, |
· | severe concentration of inventory increasing the risks associated with fire, natural disasters and logistics disruptions to customer order fulfillment. |
· | difficulty in managing manufacturing operations in a foreign country; |
· | difficulty in achieving or maintaining product quality; |
· | interruption to transportation flows for delivery of components to us and finished goods to our customers; |
· | changes in the country’s political or economic conditions; and, |
· | changes in the country’s tax laws. |
Our Business is Dependent on Key Suppliers. Our manufacturing processes use large volumes of high-quality components and subassemblies supplied by outside sources. Several of these components are available through sole or limited sources. Sole-source components purchased include custom application-specific integrated circuits (“ASICS”), chassis and other components. We have in the past experienced delays and quality problems in connection with sole-source components, and there can be no assurance that these problems will not recur in the future. Accordingly, our failure to receive sole-source components from suppliers could result in a material adverse effect on our revenues and operating results.
As a result of certain foreign investment incentives available under Hungarian law, the profit from our Hungarian operation was subject to a reduced income tax rate. This special tax status terminated on January 1, 2008, with the merger of our Hungarian manufacturing operations with its Hungarian parent company. The tax position of our Hungarian operation continued to benefit from assets created by the restructuring of our operations in Hungary. Realization of these assets was based on our estimated future earnings in Hungary. Partial release of the valuation allowance on these assets resulted in income tax benefits of $18.3 million for the year ended December 31, 2007, and $8.7 million for the year ended December 31, 2008.
· | changes in the economy or credit markets in the U.S. or globally; |
changes in the mix of products sold; |
the availability and pricing of components from third parties (especially |
fluctuations in foreign currency exchange rates; |
the timing, cost or outcome of intellectual property litigation; |
the difficulty in maintaining margins, including the higher margins traditionally achieved in international sales; and, |
changes in pricing policies by us, our competitors or suppliers. |
Specifically, if the local currencies in which we sell weaken against the U.S. dollar, and if the local sales prices cannot be raised due
As has occurred in the past and as may be expected to occur in the future, our new software products or new operating systems of third parties on which our products are based often contain bugs or errors that can result in reduced sales and/or cause our support costs to increase, either of which could have a material adverse impact on our operating results. Furthermore, we have significant revenues from customers in industries such as semiconductors, automated test equipment, telecommunications, aerospace, defense and automotive which are cyclical in nature. Downturns in these industries could have a material adverse effect on our operating results.
Seasonal Variations.
Inoutside our control, including:
· | new product introductions by competitors; |
· | product pricing; |
· | the impact of foreign exchange rates on product pricing; |
· | quality and performance; |
· | success in developing new products; |
· | adequate manufacturing capacity and supply of components and materials; |
· | efficiency of manufacturing operations; |
· | effectiveness of sales and marketing resources and strategies; |
· | strategic relationships with other suppliers; |
· | timing of our new product introductions; |
· | protection of our products by effective use of intellectual property laws; |
· | the outcome of any material intellectual property litigation; |
· | the financial strength of our competitors; |
· | barriers to entry imposed by competitors with significant market power in new markets; |
· | general market and economic conditions; and, |
· | government actions throughout the world. |
We believe our ability to compete successfully depends on a number of factors both within and outside our control, including:
There can be no assurance that we will be able to compete successfully in the future.
During 2006, we devoted resources to the initial phase of consolidating our Japanese business application suite with our European business application suite. During 2006, we also devoted resources to the continued development of our web offerings. There can be no assurance that we will not experience difficulties with these new systems. Difficulties with these new systems may interrupt our normal operations, including our ability to provide quotes, process orders, ship products, provide services and support to our customers, bill and track our customers, fulfill contractual obligations and otherwise run our business. Any disruption occurring with these systems may have a material adverse effect on our operating results. During 2007, we plan to continue to devote significant resources to the consolidation of our Japanese and European business application suites scheduled for January, 2007, to the implementation of systems that support direct shipment worldwide from our manufacturing facility and warehouse in Hungary scheduled for the third quarter of 2007 and to the continued development of our web offerings. Any failure to successfully implement these initiatives could have a material adverse effect on our operating results.
We are Subject to Various Risks Associated with International Operations and Foreign Economies.Our international sales are subject to inherent risks, including:
fluctuations in local economies; |
fluctuations in foreign currencies relative to the U.S. dollar; |
difficulties in staffing and managing foreign operations; |
greater difficulty in accounts receivable collection; |
costs and risks of localizing products for foreign countries; |
unexpected changes in regulatory requirements; |
tariffs and other trade barriers; |
difficulties in the repatriation of earnings; and, |
the burdens of complying with a wide variety of foreign laws. |
A Substantial Majority of Our Manufacturing Capacity is Located in Hungary.Our Hungarian manufacturing facility sources a substantial majority of our sales.2008. Currently, we are continuing to develop and implement information systems to support the operation of this facility. During the third quarter of 2006, we moved one of our two manufacturing linesexperiencing significant volatility in our Austin, Texas manufacturing facility to our manufacturing facilityforeign currency exchange rates in Debrecen, Hungary. In the third quarter of 2007, we intend to implement systems and processes that support the direct shipment of product orders to our customers worldwide from our manufacturing facility in Hungary. In order to better insure timely shipment of products to our customers we will maintain the vast majority of our inventory at our Hungary manufacturing facility. In addition to being subject to the risks of maintaining such a concentrated global inventory, this facility and its operation are also subject to risks associated with doing business internationally, including:
No assurance can be given that our efforts will be successful. Accordingly, a failure to deal with these factors could result in interruption in the facility’s operation or delays in expanding its capacity, either of which could have a material adverse effect on our operating results.
Our Income Tax Rate is Affected by Tax Benefits in Hungary.As a result of certain foreign investment incentives available under Hungarian law, the profit from our Hungarian operation is currently subject to a reduced income tax rate. These benefits may not be available in the future due to changes in Hungary’s political condition and/or tax laws. The reduction or elimination of these foreign investment incentives would result in the reduction or elimination of certain tax benefits thereby increasing our future effective income tax rate, which could have a material adverse effect on our operating results.
We received a substantial income tax benefit from the extraterritorial income exemption (“ETI”) under U.S. law. The ETI rules provided that a percentagemany of the profits from products and intangibles exported from the U.S. were exempt from U.S. tax.markets in which we do business. This benefit will not be available in the future as the ETI was repealed by the American Jobs Creation Act of 2004. ETI ceased to be available as of December 31, 2006. The repeal of the ETI will increase our future effective income tax rate, which could have a material adverse effect on our operating results. However, we believe that the effect of the repeal of the ETI will be offset by the effects of the expected increased benefit from the deduction for income from qualified domestic production activities and increased profits in certain foreign jurisdictions with reduced income tax rates.
Our Product Revenues are Dependent on Certain Industries.Sales of our products are dependent on customers in certain industries, particularly the telecommunications, semiconductor, automotive, automated test equipment, defense and aerospace industries. As experienced in the past, and as may be expected to occur in the future, downturns characterized by diminished product demand in any one or more of these industries could result in decreased sales, which could have a material adverse effect on our operating results.
Our Reported Financial Results may be Adversely Affected by Changes in Accounting Principles Generally Accepted in the United States.We prepare our financial statements in conformity with accounting principles generally accepted in the U.S. These accounting principles are subject to interpretation by the Financial Accounting Standards Board, the American Institute of Certified Public Accountants, the Securities and Exchange Commission and various bodies formed to interpret and create appropriate accounting policies. A change in these policies or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change. For example, beginning in the first quarter of fiscal 2006, with the adoption of SFAS 123(R), we now record a charge to earnings for employee stock option grants for all stock options unvested at December 31, 2005. This accounting pronouncement has had a material negativesignificant impact on the revaluation of our financial results. Technology companies generally,foreign currency denominated firm commitments and on our company specifically,ability to forecast our U.S. dollar equivalent revenues and expenses. In the past, these dynamics have also adversely affected our revenue growth in international markets and will likely pose similar challenges in the past relied on stock options as a major component of our employee compensation packages. Because we are required to expense options, we have changed our equity compensation program to no longer grant options but instead grant restricted stock units. Furthermore, because we are required to expense options, we may be less likely to sustain profitability in the future.
Provisions in Our Charter Documents and Delaware Law and Our Stockholder Rights Plan May Delay or Prevent an Acquisition of Us. Our certificate of incorporation and bylaws and Delaware law contain provisions that could make it more difficult for a third party to acquire us without the consent of our Board of Directors. These provisions include a classified Board of Directors, prohibition of stockholder action by written consent, prohibition of stockholders to call special meetings and the requirement that the holders of at least 80% of our shares approve any business combination not otherwise approved by two-thirds of the Board of Directors. Delaware law also imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock. In addition, our Board of Directors has the right to issue preferred stock without stockholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer. Our Board of Directors adopted a new stockholders rights plan on January 21, 2004, pursuant to which we declared a dividend of one right for each share of our common stock outstanding as of May 10, 2004. This rights plan replaced a similar rights plan that had been in effect since our initial public offering in 1995. Unless redeemed by us prior to the time the rights are exercised, upon the occurrence of certain events, the rights will entitle the holders to receive upon exercise thereof shares of our preferred stock, or shares of an acquiring entity, having a value equal to twice the then-current exercise price of the right. The issuance of the rights could have the effect of delaying or preventing a change of control of us.
We areAre Subject to the Risk of Product Liability Claims.Claims. Our products are designed to provide information upon which users may rely. Our products are also used in “real time” applications requiring extremely rapid and continuous processing and constant feedback. Such applications give rise to the risk that a failure or interruption of the system or application could result in economic damage or bodily harm. We attempt to assure the quality and accuracy of the processes contained in our products, and to limit our product liability exposure through contractual limitations on liability, limited warranties, express disclaimers and warnings as well as disclaimers contained in our “shrink wrap” license agreements with end-users. If our products contain errors that produce incorrect results on which users rely or cause failure or interruption of systems or processes, customer acceptance of our products could be adversely affected. Further, we could be subject to liability claims that could have a material adverse effect on our operating results or financial position. Although we maintain liability insurance for product liability matters, there can be no assurance that such insurance or the contractual limitations used by us to limit our liability will be sufficient to cover or limit any claims which may occur.
We own approximately 17 acres of land in an industrial park in Penang, Malaysia.
High | Low | ||||
---|---|---|---|---|---|
2006 | |||||
First Quarter 2006 | $ | 36.28 | $ | 31.32 | |
Second Quarter 2006 | 33.67 | 26.18 | |||
Third Quarter 2006 | 27.89 | 24.55 | |||
Fourth Quarter 2006 | 31.60 | 26.63 | |||
2005 | |||||
First Quarter 2005 | $ | 29.14 | $ | 24.68 | |
Second Quarter 2005 | 24.37 | 20.92 | |||
Third Quarter 2005 | 29.25 | 21.35 | |||
Fourth Quarter 2005 | 32.74 | 23.15 |
High | Low | |||||||
2009 | ||||||||
First Quarter 2009 | $ | 23.40 | $ | 15.82 | ||||
Second Quarter 2009 | 23.61 | 18.41 | ||||||
Third Quarter 2009 | 28.42 | 21.26 | ||||||
Fourth Quarter 2009 | 29.85 | 26.52 | ||||||
2008 | ||||||||
First Quarter 2008 | $ | 31.95 | $ | 24.19 | ||||
Second Quarter 2008 | 31.85 | 25.59 | ||||||
Third Quarter 2008 | 34.63 | 25.88 | ||||||
Fourth Quarter 2008 | 27.99 | 20.20 |
We paidcommon stock.
2009 | ||||
March 2, 2009 | $ | 0.12 | ||
June 1, 2009 | 0.12 | |||
August 31, 2009 | 0.12 | |||
November 30, 2009 | 0.12 | |||
2008 | ||||
March 3, 2008 | $ | 0.11 | ||
June 2, 2008 | 0.11 | |||
September 2, 2008 | 0.11 | |||
December 1, 2008 | 0.11 |
Period | Total number of shares | Average price paid per share | Total number of shares purchased as part of a publicly announced plan or program | Maximum number of shares that may yet be purchased under the plan or program (1) | ||||||||||||
October 1, 2009 to October 31, 2009 | — | — | — | 2,262,168 | ||||||||||||
November 1, 2009 to November 30, 2009 | 573,841 | $ | 28.55 | 573,841 | 1,688,327 | |||||||||||
December 1, 2009 to December 31, 2009 | — | — | — | 1,688,327 | ||||||||||||
Total | 573,841 | $ | 28.55 | 573,841 |
Years Ended December 31, | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||
(in thousands, except per share data) | |||||||||||||||||
Statements of Income Data: | |||||||||||||||||
Net sales: | |||||||||||||||||
Americas | $ | 317,780 | $ | 275,524 | $ | 243,651 | $ | 200,210 | $ | 195,770 | |||||||
Europe | 193,364 | 171,499 | 164,895 | 137,761 | 122,800 | ||||||||||||
Asia Pacific | 149,263 | 124,818 | 105,542 | 87,921 | 72,220 | ||||||||||||
Consolidated net sales | 660,407 | 571,841 | 514,088 | 425,892 | 390,790 | ||||||||||||
Cost of sales | 170,326 | 149,309 | 135,473 | 111,672 | 105,086 | ||||||||||||
Gross profit | 490,081 | 422,532 | 378,615 | 314,220 | 285,704 | ||||||||||||
Operating expenses: | |||||||||||||||||
Sales and marketing | 235,072 | 211,280 | 188,727 | 160,478 | 145,671 | ||||||||||||
Research and development | 113,095 | 87,841 | 84,692 | 70,896 | 63,964 | ||||||||||||
General and administrative | 54,192 | 45,199 | 42,500 | 42,497 | 35,714 | ||||||||||||
Total operating expenses | 402,359 | 344,320 | 315,919 | 273,871 | 245,349 | ||||||||||||
Operating income | 87,722 | 78,212 | 62,696 | 40,349 | 40,355 | ||||||||||||
Other income (expense): | |||||||||||||||||
Interest income | 6,847 | 3,758 | 2,905 | 2,511 | 3,295 | ||||||||||||
Net foreign exchange gain (loss) | 740 | (1,566 | ) | 1,287 | 1,125 | (724 | ) | ||||||||||
Other income (expense), net | (7 | ) | 276 | (2,075 | ) | 506 | 692 | ||||||||||
Income before income taxes | 95,302 | 80,680 | 64,813 | 44,491 | 43,618 | ||||||||||||
Provision for income taxes | 22,594 | 19,163 | 16,203 | 11,123 | 12,213 | ||||||||||||
Net income | $ | 72,708 | $ | 61,517 | $ | 48,610 | $ | 33,368 | $ | 31,405 | |||||||
Basic earnings per share | $ | 0.91 | $ | 0.78 | $ | 0.62 | $ | 0.43 | $ | 0.41 | |||||||
Weighted average shares outstanding - basic | 79,519 | 78,552 | 78,680 | 77,438 | 76,829 | ||||||||||||
Diluted earnings per share | $ | 0.89 | $ | 0.76 | $ | 0.59 | $ | 0.41 | $ | 0.39 | |||||||
Weighted average shares outstanding - diluted | 81,519 | 80,910 | 82,096 | 80,946 | 80,117 | ||||||||||||
Cash dividends paid per common share | $ | 0.24 | $ | 0.20 | $ | 0.18 | $ | 0.07 | $ | — | |||||||
December 31, | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||
(in thousands) | |||||||||||||||||
Balance Sheet Data: | |||||||||||||||||
Cash and cash equivalents | $ | 100,287 | $ | 55,864 | $ | 76,216 | $ | 53,446 | $ | 12,840 | |||||||
Short-term investments | 150,190 | 119,846 | 150,392 | 141,227 | 141,038 | ||||||||||||
Working capital | 374,512 | 274,686 | 309,635 | 255,330 | 211,453 | ||||||||||||
Total assets | 721,220 | 608,336 | 582,093 | 525,151 | 458,714 | ||||||||||||
Long-term debt, net of current portion | — | — | — | — | — | ||||||||||||
Total stockholders' equity | 596,682 | 503,850 | 486,449 | 439,452 | 386,463 |
Years Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
Statements of Income Data: | ||||||||||||||||||||
Net sales: | ||||||||||||||||||||
Americas | $ | 292,999 | $ | 355,878 | $ | 331,482 | $ | 317,780 | $ | 275,524 | ||||||||||
Europe . | 210,188 | 267,373 | 230,940 | 193,364 | 171,499 | |||||||||||||||
Asia Pacific | 173,407 | 197,286 | 177,956 | 149,263 | 124,818 | |||||||||||||||
Consolidated net sales | 676,594 | 820,537 | 740,378 | 660,407 | 571,841 | |||||||||||||||
Cost of sales | 169,884 | 207,109 | 185,267 | 173,348 | 151,939 | |||||||||||||||
Gross profit | 506,710 | 613,428 | 555,111 | 487,059 | 419,902 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Sales and marketing | 269,267 | 307,409 | 264,060 | 232,050 | 208,650 | |||||||||||||||
Research and development | 132,974 | 143,140 | 126,515 | 113,095 | 87,841 | |||||||||||||||
General and administrative | 57,938 | 67,162 | 62,445 | 54,192 | 45,199 | |||||||||||||||
Total operating expenses | 460,179 | 517,711 | 453,020 | 399,337 | 341,690 | |||||||||||||||
Operating income | 46,531 | 95,717 | 102,091 | 87,722 | 78,212 | |||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 1,629 | 5,996 | 9,822 | 6,847 | 3,758 | |||||||||||||||
Net foreign exchange gain (loss) | 734 | (3,737 | ) | 1,672 | 740 | (1,566 | ) | |||||||||||||
Other income (expense), net | 1,351 | 161 | (158 | ) | (7 | ) | 276 | |||||||||||||
Income before income taxes | 50,245 | 98,137 | 113,427 | 95,302 | 80,680 | |||||||||||||||
Provision for income taxes | 33,160 | 13,310 | 6,394 | 22,594 | 19,163 | |||||||||||||||
Net income | $ | 17,085 | $ | 84,827 | $ | 107,033 | $ | 72,708 | $ | 61,517 | ||||||||||
Basic earnings per share | $ | 0.22 | $ | 1.08 | $ | 1.35 | $ | 0.91 | $ | 0.78 | ||||||||||
Weighted average shares outstanding - basic | 77,520 | 78,567 | 79,468 | 79,519 | 78,552 | |||||||||||||||
Diluted earnings per share | $ | 0.22 | $ | 1.07 | $ | 1.32 | $ | 0.89 | $ | 0.76 | ||||||||||
Weighted average shares outstanding - diluted | 78,026 | 79,515 | 81,043 | 81,519 | 80,910 | |||||||||||||||
Cash dividends declared per common share | $ | 0.48 | $ | 0.44 | $ | 0.34 | $ | 0.24 | $ | 0.20 |
December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 201,465 | $ | 229,400 | $ | 194,839 | $ | 100,287 | $ | 55,864 | ||||||||||
Short-term investments | 87,196 | 6,220 | 93,838 | 150,190 | 119,846 | |||||||||||||||
Working capital | 413,759 | 398,292 | 419,874 | 379,733 | 274,686 | |||||||||||||||
Total assets | 813,029 | 832,591 | 818,812 | 721,220 | 608,336 | |||||||||||||||
Long-term debt, net of current portion | — | — | — | — | — | |||||||||||||||
Total stockholders’ equity | 654,420 | 664,438 | 661,086 | 596,682 | 503,850 |
2007.
base
satisfaction
technology
that we target. Starting in August 2009, the PMI has had readings above 50 which are indicative of expansion in the industrial global economy. However, we believe there is still a substantial amount of uncertainty about the global industrial economic conditions. We are unable to predict whether the current expansion cycle, as measured by the PMI, will be sustained throughout 2010. This continuing uncertainty in the global industrial economy is likely to continue to have an adverse effect on the spending patterns of businesses including our current and potential customers which could adversely affect our revenues and therefore harm our business and result of operations.
long-lived assets).
Years Ended December 31, | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2006 | 2005 | 2004 | ||||||||||||
Net sales: | ||||||||||||||
Americas | 48.1 | % | 48.2 | % | 47.4 | % | ||||||||
Europe | 29.3 | 30.0 | 32.1 | |||||||||||
Asia Pacific | 22.6 | 21.8 | 20.5 | |||||||||||
Consolidated net sales | 100.0 | 100.0 | 100.0 | |||||||||||
Cost of sales | 25.8 | 26.1 | 26.4 | |||||||||||
Gross profit | 74.2 | 73.9 | 73.6 | |||||||||||
Operating expenses: | ||||||||||||||
Sales and marketing | 35.6 | 36.9 | 36.7 | |||||||||||
Research and development | 17.1 | 15.4 | 16.4 | |||||||||||
General and administrative | 8.2 | 7.9 | 8.3 | |||||||||||
Total operating expenses | 60.9 | 60.2 | 61.4 | |||||||||||
Operating income | 13.3 | 13.7 | 12.2 | |||||||||||
Other income (expense): | ||||||||||||||
Interest income | 1.0 | 0.7 | 0.5 | |||||||||||
Net foreign exchange gain (loss) | 0.1 | (0.3 | ) | 0.3 | ||||||||||
Other income (expense), net | — | — | (0.4 | ) | ||||||||||
Income before income taxes | 14.4 | 14.1 | 12.6 | |||||||||||
Provision for income taxes | 3.4 | 3.3 | 3.1 | |||||||||||
Net income | 11.0 | % | 10.8 | % | 9.5 | % | ||||||||
Income:
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Net sales: | ||||||||||||
Americas | 43.3 | % | 43.4 | % | 44.8 | % | ||||||
Europe | 31.1 | 32.6 | 31.2 | |||||||||
Asia Pacific | 25.6 | �� | 24.0 | 24.0 | ||||||||
Consolidated net sales | 100.0 | 100.0 | 100.0 | |||||||||
Cost of sales | 25.1 | 25.2 | 25.0 | |||||||||
Gross profit | 74.9 | 74.8 | 75.0 | |||||||||
Operating expenses: | ||||||||||||
Sales and marketing | 39.8 | 37.5 | 35.7 | |||||||||
Research and development | 19.6 | 17.4 | 17.1 | |||||||||
General and administrative | 8.6 | 8.2 | 8.4 | |||||||||
Total operating expenses | 68.0 | 63.1 | 61.2 | |||||||||
Operating income | 6.9 | 11.7 | 13.8 | |||||||||
Other income (expense): | ||||||||||||
Interest income | 0.2 | 0.7 | 1.3 | |||||||||
Net foreign exchange gain (loss) | 0.1 | (0.5 | ) | 0.2 | ||||||||
Other income (expense), net | 0.2 | — | — | |||||||||
Income before income taxes | 7.4 | 11.9 | 15.3 | |||||||||
Provision for income taxes | 4.9 | 1.6 | 0.8 | |||||||||
Net income | 2.5 | % | 10.3 | % | 14.5 | % |
2% compared to 2007.
We also utilize The gain or loss on these derivatives as well as the offsetting gain or loss on the hedge item attributable to the hedged risk is recognized in current earnings under the line item “net foreign exchange gain (loss)”. Our hedging strategy reduced our foreign exchange gains by $1.7 million in 2009, reduced our foreign exchange losses by $1.2 million in 2008 and reduced our foreign exchange gains by $1.1 million in 2007.
positions).
Provision for Income Taxes.Our provision for income taxes reflectsreflected an effective tax rate of 24%66%, 14% and 6% for the years ended December 31, 2009, 2008 and 2007, respectively. The increase in 2006 and 2005 and 25% in 2004. Ourour effective tax rate is lower thanin 2009 compared to 2008 was driven by changes in our valuation allowances, tax charges related to inter-company profits and an increase in equity compensation expense as a percentage of pre-tax book income. (See Note 9 – Income taxes of Notes to Consolidated Financial Statements for further discussion regarding changes in our effective tax rate and a reconciliation of income taxes at the U.S. federal statutory income tax rate of 35% primarily as a result of the extraterritorial income exclusion, tax-exempt interest and reducedto our effective tax rates in certain foreign jurisdictions. The decreases in our tax rate in 2006 and 2005 from 2004 are due to increased profits in foreign jurisdictions with reduced income tax rates.rate).
We currently finance The following table presents our working capital, cash and cash equivalents and marketable securities (in thousands):
December 31, 2009 | December 31, 2008 | Increase/ (Decrease) | ||||||||||
Working capital | $ | 413,759 | $ | 398,292 | $ | 15,467 | ||||||
Cash and cash equivalents (1) | 201,465 | 229,400 | (27,935 | ) | ||||||||
Short-term investments (1) | 87,196 | 6,220 | 80,976 | |||||||||
Long-term investments | — | 10,500 | (10,500 | ) | ||||||||
Total cash, cash equivalents, short and long-term investments | $ | 288,661 | $ | 246,120 | $ | 42,541 |
December 31, | ||||||||
2009 | 2008 | |||||||
Cash provided by operating activities | $ | 135,651 | $ | 121,818 | ||||
Cash (used in)/provided by investing activities | (111,915 | ) | 18,756 | |||||
Cash (used in) financing activities | (51,671 | ) | (106,013 | ) | ||||
Net (decrease)/increase in cash equivalents | (27,935 | ) | 34,561 | |||||
Cash and cash equivalents at beginning of year | 229,400 | 194,839 | ||||||
Cash and cash equivalents at end of year | $ | 201,465 | $ | 229,400 |
decrease in prepaid expenses and other assets, offset by a decrease of $10 million in accounts payable, taxes and other liabilities. In 2008, cash provided by operating activities was primarily the result of $84.8 million in net income and $51.3 million in net non-cash operating expenses which primarily consisted of depreciation and amortization, stock-based compensation, and benefits from deferred income taxes, offset in part by $14.3 million in net cash used by changes in operating assets and liabilities, principally a $24.6 million increase in inventory.
Cash provided by the issuance of our common stock totaled $37.1from the exercise of stock options and sales of our common stock through our employee stock purchase plan. For 2008, financing activities used $106 million $23.2which was the result of $104 million used to repurchase our common stock and $16.8$35 million used to pay dividends to our shareholders, offset by $31 million received as a result of the issuance of our common stock from the exercise of stock options and our employee stock purchase plan.
Obligations.
The following summarizes our contractual cash obligations as of December 31,Payments Due by Period | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Total | 2007 | 2008 | 2009 | 2010 | 2011 | Beyond | |||||||||||||||||
Long-term debt | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Capital lease obligations | — | — | — | — | — | — | — | ||||||||||||||||
Operating leases | 23,691 | 7,241 | 5,682 | 4,883 | 3,103 | 1,983 | 799 | ||||||||||||||||
Other long-term obligations | — | — | — | — | — | — | — | ||||||||||||||||
Total contractual cash obligations | $ | 23,691 | $ | 7,241 | $ | 5,682 | $ | 4,883 | $ | 3,103 | $ | 1,983 | $ | 799 | |||||||||
Payments Due by Period | ||||||||||||||||||||||||||||
Total | 2010 | 2011 | 2012 | 2013 | 2014 | Beyond | ||||||||||||||||||||||
Long-term debt | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Capital lease obligations | — | — | — | — | — | ��� | — | |||||||||||||||||||||
Operating leases | 51,701 | 14,415 | 9,898 | 6,982 | 4,611 | 3,665 | 12,130 | |||||||||||||||||||||
Total contractual cash obligations | $ | 51,701 | $ | 14,415 | $ | 9,898 | $ | 6,982 | $ | 4,611 | $ | 3,665 | $ | 12,130 |
Total | 2007 | 2008 | 2009 | 2010 | 2011 | Beyond | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Guarantees | $ | 3,500 | $ | 3,500 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Purchase obligations | 7,004 | 7,004 | — | — | — | — | — | ||||||||||||||||
Total commercial commitments | $ | 10,504 | $ | 10,504 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Total | 2010 | 2011 | 2012 | 2013 | 2014 | Beyond | ||||||||||||||||||||||
Guarantees | $ | 5,200 | $ | 5,200 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Purchase obligations | 6,500 | 6,500 | — | — | — | — | — | |||||||||||||||||||||
Total commercial commitments | $ | 11,700 | $ | 11,700 | $ | — | $ | — | $ | — | $ | — | $ | — |
Financial Risk Management
Our international sales are subject to inherent risks, including fluctuations in local economies; difficulties in staffing and managing foreign operations; greater difficulty in accounts receivable collection; costs and risks of localizing products for foreign countries; unexpected changes in regulatory requirements, tariffs and other trade barriers; difficulties in the repatriation of earnings and burdens of complying with a wide variety of foreign laws. The vast majority of our sales outside of North America are denominated in local currencies, and accordingly, we are subject to the risks associated with fluctuations in currency rates. In particular, increases in the value of the dollar against foreign currencies decrease the U.S. dollar value of foreign sales requiring that we either increase our price in the local currency, which could render our product prices noncompetitive, or suffer reduced revenues and gross margins as measured in U.S. dollars. These dynamics have adversely affected our revenue growth in international markets in previous years. Our foreign currency hedging program includes both foreign currency forward and purchased option contracts to reduce the effect of exchange rate fluctuations. However, our hedging program will not eliminate all of our foreign exchange risks. (See “Net Foreign Exchange Gain (Loss)” and Note 11 of Notes to Consolidated Financial Statements.)
The marketplace for our products dictates that many of our products be shipped very quickly after an order is received. As a result, we are required to maintain significant inventories. Therefore, inventory obsolescence is a risk for us due to frequent engineering changes, shifting customer demand, the emergence of new industry standards and rapid technological advances including the introduction by us or our competitors of products embodying new technology. While we adjust for excess and obsolete inventories and we monitor the valuation of our inventories, there can be no assurance that our valuation adjustments will be sufficient.
Off-Balance Sheet Arrangements
We have no debt or off-balance sheet debt. As of December 31, 2006,2009, we have non-cancelable operating lease obligations of approximately $23.7$52 million compared to $50 million at December 31, 2008. Rent expense under operating leases was $12 million, $12 million and contractual$10 million for the years ended December 31, 2009, 2008 and 2007, respectively.
We are exposedbelieve that our existing cash, cash equivalents and marketable securities, together with cash generated from operations and from the exercise of employee stock options and the purchase of common stock through our employee stock purchase plan, will be sufficient to a varietycover our working capital needs, capital expenditures, investment requirements, commitments, payment of risks, including foreign currency fluctuationsdividends to our shareholders and changes in the market valuerepurchases of our investments. Incommon stock for at least the normal coursenext 12 months. However, we may choose or be required to raise additional funds by selling equity or debt securities to the public or to selected investors, or by borrowing money from financial institutions. Historically, we have not had to rely on debt, public or private, to fund our operating, financing or investing activities. We could also choose or be required to reduce certain expenditures, such as payments of business, we employ established policies and procedures to manage our exposure to fluctuations in foreign currency values and changes in the market valuedividends or repurchases of our investments.
Foreign Currency Hedging Activities. Our objective in managing our exposurecommon stock. In addition, even though we may not need additional funds, we may still elect to foreign currency exchange rate fluctuations issell additional equity or debt securities or obtain credit facilities for other reasons. If we elect to reduceraise additional funds, we may not be able to obtain such funds on a timely basis on acceptable terms, if at all. If we raise additional funds by issuing additional equity or convertible debt securities, the impactownership percentages of adverse fluctuations in such exchange rates on our earnings and cash flow. Accordingly,existing shareholders would be reduced. In addition, the equity or debt securities that we utilize purchased foreign currency option contracts and forward contractsissue may have rights, preferences or privileges senior to hedge our exposure on anticipated transactions and firm commitments. The principal currencies hedged are the euro, British pound and Japanese yen. We monitor our foreign exchange exposures regularly to ensure the overall effectivenessthose of our foreign currency hedge positions. However, there can be no assurance that our foreign currency hedging activities will substantially offset the impact of fluctuations in currency exchange rates on our results of operations and financial position. Based on the foreign exchange instruments outstanding at December 31, 2006 and 2005, an adverse change (defined as 20% in the Asian currencies and 10% in all other currencies) in exchange rates would result in a decline in the aggregate fair market value of all of our instruments outstanding of approximately $6.6 million and $4.2 million, respectively. However, as we utilize foreign currency instruments for hedging anticipated and firmly committed transactions,common stock.
Short-term Investments. The fair value of our investments in marketable securities at December 31, 2006 and 2005 was $150.2 million and $119.8 million, respectively. Investments with maturities beyond one year are classified as short-term basedfuture will depend on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. Our investment policy is to manage our investment portfolio to preserve principal and liquidity while maximizing the return on our investment portfolio through the full investment of available funds. We diversify our marketable securities portfolio by investing in multiple types of investment-grade securities. Our investment portfolio is primarily invested in securities with at least an investment grade rating to minimize interest rate and credit risk as well as to provide for an immediate source of funds. Based on our investment portfolio and interest rates at December 31, 2006 and 2005, a 100 basis point increase or decrease in interest rates would result in a decrease or increase of approximately $750,000 and $600,000, respectively, in the fair value of our investment portfolio. Although changes in interest rates may affect the fair value of our investment portfolio and cause unrealized gains or losses, such gains or losses would not be realized unless the investments are sold.
many factors, including:
· | general economic and political conditions and specific conditions in the markets we address, including the continuing volatility in the industrial economy, current general economic volatility and trends in the industrial economy in various geographic regions in which we do business; |
· | the inability of certain of our customers who depend on credit to have access to their traditional sources of credit to finance the purchase of products from us, particularly in the current global economic environment, which may lead them to reduce their level of purchases or to seek credit or other accommodations from us; |
· | the overall levels of sales of our products and gross profit margins; |
· | our business, product, capital expenditure and research and development plans, and product and technology roadmaps; |
· | repurchases of our common stock; |
· | required levels of research and development and other operating costs; |
· | litigation expenses, settlements and judgments; |
· | the levels of inventory and accounts receivable that we maintain; |
· | acquisitions of other businesses, assets, products or technologies; |
· | capital improvements for new and existing facilities; |
· | our relationships with suppliers and customers; and, |
· | the level of exercises of stock options and stock purchases under our employee stock purchase plan. |
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We continue to enhance our internal control over financial reporting in key functional areas with the goal of monitoring our operations at the level of documentation, segregation of duties, and systems security necessary, as well as transactional control procedures required under Auditing Standard No. 5 issued by the Public Company Accounting Oversight Board. We discuss and disclose these matters to the audit committee of our board of directors and to our auditors.
During 2002, we irrevocably contributed approximately $3.6 million to the National Instruments Foundation, a 501(c)(3) charitable foundation established in 2002 for the purpose of continued promotion of scientific and engineering research and education at higher education institutions worldwide. Two of the four directors of the National Instruments Foundation are current officers of National Instruments.
(a) | Documents |
Exhibit Number | Description | ||
3.1(2) | Certificate of Incorporation, as amended, of the Company. | ||
3.2(11) | Amended and Restated Bylaws of the Company. | ||
3.3(4) | Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock of the Company. | ||
4.1(1) | Specimen of Common Stock certificate of the Company. | ||
4.2(3) | Rights Agreement dated as of January 21, 2004, between the Company and EquiServe Trust Company, N.A. | ||
10.1(1) | Form of Indemnification Agreement. | ||
10.2(5) | 1994 Incentive Plan, as amended.* | ||
10.3(9) | 1994 Employee Stock Purchase Plan.* | ||
10.5(7) | 2005 Incentive Plan.* | ||
10.6(8) | National Instruments Corporation Annual Incentive Program.* | ||
10.7(6) | National Instruments Corporation Annual Incentive Program, as amended.* | ||
10.8(10) | Form of Restricted Stock Unit Award Agreement (Non-Employee Director).* | ||
10.9(10) | Form of Restricted Stock Unit Award Agreement (Performance Vesting).* | ||
10.10(10) | Form of Restricted Stock Unit Award Agreement (Current Employee).* | ||
10.11(10) | Form of Restricted Stock Unit Award Agreement (Newly Hired Employee).* | ||
21.1 | Subsidiaries of the Company. | ||
23.1 | Consent of Independent Registered Public Accounting | ||
Exhibit Number | Description | |
---|---|---|
3.1 | (2) | Certificate of Incorporation, as amended, of the Company. |
3.2 | (2) | Amended and Restated Bylaws of the Company. |
3.3 | (4) | Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock of the Company. |
4.1 | (1) | Specimen of Common Stock certificate of the Company. |
4.2 | (3) | Rights Agreement dated as of January 21, 2004, between the Company and EquiServe Trust Company, N.A. |
10.1 | (1) | Form of Indemnification Agreement. |
10.2 | (5) | 1994 Incentive Plan, as amended.* |
10.3 | 1994 Employee Stock Purchase Plan.* | |
10.4 | (6) | Long-Term Incentive Program.* |
10.5 | (7) | 2005 Incentive Plan.* |
10.6 | (8) | National Instruments Corporation Annual Incentive Program.* |
10.7 | (9) | 2006 Annual Incentive Program Goals and Awards for the Named Executive Officers.* |
10.8 | (10) | Form of Restricted Stock Unit Award Agreement (Non-Employee Director).* |
10.9 | (10) | Form of Restricted Stock Unit Award Agreement (Performance Vesting).* |
10.10 | (10) | Form of Restricted Stock Unit Award Agreement (Current Employee).* |
10.11 | (10) | Form of Restricted Stock Unit Award Agreement (Newly Hired Employee).* |
21.1 | Subsidiaries of the Company. | |
23.1 | Consent of Independent Registered Public Accounting Firm. | |
23.2 | Consent of Independent Registered Public Accounting Firm. | |
24.0 | Power of Attorney (included on page 33). | |
31.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
24.0 | Power of Attorney (included on page 41). | |
31.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
(1) | Incorporated by reference to the Company's Registration Statement on Form S-1 (Reg. |
(2) | Incorporated by reference to the same-numbered exhibit filed with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003. |
(3) | Incorporated by reference to exhibit 4.1 filed with the Company's |
(4) | Incorporated by reference to the same-numbered exhibit filed with the Company's Form 8-K on April 27, 2004. |
(5) | Incorporated by reference to the same-numbered exhibit filed with the Company's Form 10-Q on August 5, 2004. |
(6) | Incorporated by reference to exhibit 99.2 filed with the Company's Current Report on Form 8-K filed on October 28, 2008. |
(7) | Incorporated by reference to exhibit A of the Company's Proxy Statement dated and filed on April 4, 2005. |
(8) | Incorporated by reference to exhibit 99.2 filed with the Company's Current Report on Form 8-K filed on October 22, 2008. |
(9) | Incorporated by reference to exhibit 10.3 filed with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006. |
(10) | Incorporated by reference to the same-numbered exhibit filed with the Company's Form 10-Q on August 2, 2006. |
(11) | Incorporated by reference to the same-numbered exhibit filed with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, |
* | Management Contract or Compensatory Plan or Arrangement. |
(b) | Exhibits |
(c) | Financial Statement Schedules |
Registrant | ||||||
NATIONAL INSTRUMENTS CORPORATION | ||||||
February | /s/ Dr. James J. Truchard | |||||
Dr. James J. Truchard | ||||||
Chairman of the Board and President | ||||||
Signature | Capacity in Which Signed | Date | |||||
/s/ Dr. James J. Truchard | Chairman of the Board and President (Principal Executive Officer) | February 17, 2010 | |||||
Dr. James J. Truchard | |||||||
/s/ Alex M. Davern | Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) | February 17, 2010 | |||||
Alex M. Davern | |||||||
/s/ Jeffrey L. Kodosky | Director | February 17, 2010 | |||||
Jeffrey L. Kodosky | |||||||
/s/ Dr. Donald M. Carlton | Director | February 17, 2010 | |||||
Dr. Donald M. Carlton | |||||||
/s/ Charles J. Roesslein | Director | February 17, 2010 | |||||
Charles J. Roesslein | |||||||
/s/ Duy-Loan T. Le | Director | February 17, 2010 | |||||
Duy-Loan T. Le | |||||||
/s/ John Medica | Director | February | |||||
John Medica |
Page No. | ||
Financial Statements: | ||
Report of Independent Registered Public Accounting Firm | ||
Report of Independent Registered Public Accounting Firm | ||
Consolidated Balance Sheets as of December 31, | ||
Consolidated Statements of Income for each of the Three Years in the period Ended December 31, | ||
Consolidated Statements of Cash Flows for each of the Three Years in the period Ended December 31, | ||
Consolidated Statements of Stockholders' Equity for each of the Three Years in the period Ended December 31, | ||
Notes to Consolidated Financial Statements |
As discussed in Note 1 to the consolidated financial statements, effective January 1, 2006, the Company changed its method of accounting for stock-based compensation to conform to Statement of Financial Accounting Standards No. 123(R), Share-Based Payment.
To the Board of Directors and Stockholders of National Instruments Corporation:
In our opinion, the consolidated statements of income, of stockholders’ equity and of cash flows (appearing on pages F-6 through F-8 of this National Instruments Corporation 2006 Annual Report on Form 10-K) for the year ended December 31, 2004 present fairly, in all material respects, the results of operations and cash flows of National Instruments Corporation and its subsidiaries for the year ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule for the year ended December 31, 2004 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2006 | 2005 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 100,287 | $ | 55,864 | ||||
Short-term investments | 150,190 | 119,846 | ||||||
Accounts receivable, net | 117,235 | 95,733 | ||||||
Inventories, net | 77,138 | 62,827 | ||||||
Prepaid expenses and other current assets | 11,393 | 13,146 | ||||||
Deferred income taxes, net | 20,851 | 14,890 | ||||||
Total current assets | 477,094 | 362,306 | ||||||
Property and equipment, net | 145,425 | 144,330 | ||||||
Goodwill, net | 53,343 | 52,533 | ||||||
Intangible assets, net | 40,065 | 43,602 | ||||||
Other long-term assets | 5,293 | 5,565 | ||||||
Total assets | $ | 721,220 | $ | 608,336 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 32,001 | $ | 30,832 | ||||
Accrued compensation | 20,912 | 18,084 | ||||||
Deferred revenue | 22,208 | 16,018 | ||||||
Accrued expenses and other liabilities | 15,934 | 8,838 | ||||||
Other taxes payable | 11,527 | 13,848 | ||||||
Total current liabilities | 102,582 | 87,620 | ||||||
Deferred income taxes | 21,956 | 16,866 | ||||||
Total liabilities | 124,538 | 104,486 | ||||||
Commitments and contingencies | ||||||||
Stockholders' equity: | ||||||||
Preferred stock: par value $0.01; 5,000,000 shares authorized; none issued and outstanding | — | — | ||||||
Common stock: par value $0.01; 180,000,000 shares authorized; | ||||||||
79,883,837 and 79,276,086 shares issued and outstanding, respectively | 799 | 793 | ||||||
Additional paid-in capital | 109,851 | 91,430 | ||||||
Deferred stock-based compensation | — | (16,547 | ) | |||||
Retained earnings | 483,533 | 429,859 | ||||||
Accumulated other comprehensive income (loss) | 2,499 | (1,685 | ) | |||||
Total stockholders' equity | 596,682 | 503,850 | ||||||
Total liabilities and stockholders' equity | $ | 721,220 | $ | 608,336 | ||||
December 31, | ||||||||
2009 | 2008 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 201,465 | $ | 229,400 | ||||
Short-term investments | 87,196 | 6,220 | ||||||
Accounts receivable, net | 103,957 | 121,548 | ||||||
Inventories, net | 86,515 | 107,358 | ||||||
Prepaid expenses and other current assets | 36,523 | 43,062 | ||||||
Deferred income taxes, net | 16,522 | 21,435 | ||||||
Total current assets | 532,178 | 529,023 | ||||||
Long-term investments | — | 10,500 | ||||||
Property and equipment, net | 153,265 | 154,477 | ||||||
Goodwill, net | 64,779 | 64,561 | ||||||
Intangible assets, net | 43,390 | 41,915 | ||||||
Other long-term assets | 19,417 | 32,115 | ||||||
Total assets | $ | 813,029 | $ | 832,591 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 23,502 | $ | 30,876 | ||||
Accrued compensation | 14,934 | 22,012 | ||||||
Deferred revenue | 57,242 | 45,514 | ||||||
Accrued expenses and other liabilities | 8,560 | 18,848 | ||||||
Other taxes payable | 14,181 | 13,481 | ||||||
Total current liabilities | 118,419 | 130,731 | ||||||
Deferred income taxes | 25,012 | 25,157 | ||||||
Liability for uncertain tax positions | 11,062 | 9,364 | ||||||
Other long-term liabilities | 4,116 | 2,901 | ||||||
Total liabilities | 158,609 | 168,153 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock: par value $0.01; 5,000,000 shares authorized; none issued and outstanding | — | — | ||||||
Common stock: par value $0.01; 180,000,000 shares authorized; 77,367,874 and 77,193,063 shares issued and outstanding, respectively | 774 | 772 | ||||||
Additional paid-in capital | 336,446 | 300,352 | ||||||
Retained earnings | 303,655 | 352,831 | ||||||
Accumulated other comprehensive income | 13,545 | 10,483 | ||||||
Total stockholders’ equity | 654,420 | 664,438 | ||||||
Total liabilities and stockholders’ equity | $ | 813,029 | $ | 832,591 |
For the Years | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Ended December 31, | |||||||||||
2006 | 2005 | 2004 | |||||||||
Net sales | $ | 660,407 | $ | 571,841 | $ | 514,088 | |||||
Cost of sales (1) | 170,326 | 149,309 | 135,473 | ||||||||
Gross profit | 490,081 | 422,532 | 378,615 | ||||||||
Operating expenses: | |||||||||||
Sales and marketing (2) | 235,072 | 211,280 | 188,727 | ||||||||
Research and development (3) | 113,095 | 87,841 | 84,692 | ||||||||
General and administrative (4) | 54,192 | 45,199 | 42,500 | ||||||||
Total operating expenses | 402,359 | 344,320 | 315,919 | ||||||||
Operating income | 87,722 | 78,212 | 62,696 | ||||||||
Other income (expense): | |||||||||||
Interest income | 6,847 | 3,758 | 2,905 | ||||||||
Net foreign exchange gain (loss) | 740 | (1,566 | ) | 1,287 | |||||||
Other income (expense), net | (7 | ) | 276 | (2,075 | ) | ||||||
Income before income taxes | 95,302 | 80,680 | 64,813 | ||||||||
Provision for income taxes (5) | 22,594 | 19,163 | 16,203 | ||||||||
Net income | $ | 72,708 | $ | 61,517 | $ | 48,610 | |||||
Basic earnings per share | $ | 0.91 | $ | 0.78 | $ | 0.62 | |||||
Weighted average shares outstanding - basic | 79,519 | 78,552 | 78,680 | ||||||||
Diluted earnings per share | $ | 0.89 | $ | 0.76 | $ | 0.59 | |||||
Weighted average shares outstanding - diluted | 81,519 | 80,910 | 82,096 | ||||||||
Dividends declared per share | $ | 0.24 | $ | 0.20 | $ | 0.18 | |||||
The following footnotes apply to the years ended December 31, 2006, 2005 and 2004:
For the Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Net sales: | ||||||||||||
Product | $ | 623,736 | $ | 765,441 | $ | 701,589 | ||||||
Software maintenance | 52,858 | 55,096 | 38,789 | |||||||||
Total net sales | 676,594 | 820,537 | 740,378 | |||||||||
Cost of sales: | ||||||||||||
Product | 164,700 | 201,064 | 180,556 | |||||||||
Software maintenance | 5,184 | 6,045 | 4,711 | |||||||||
Total cost of sales | 169,884 | 207,109 | 185,267 | |||||||||
Gross profit | 506,710 | 613,428 | 555,111 | |||||||||
Operating expenses: | ||||||||||||
Sales and marketing | 269,267 | 307,409 | 264,060 | |||||||||
Research and development | 132,974 | 143,140 | 126,515 | |||||||||
General and administrative | 57,938 | 67,162 | 62,445 | |||||||||
Total operating expenses | 460,179 | 517,711 | 453,020 | |||||||||
Operating income | 46,531 | 95,717 | 102,091 | |||||||||
Other income (expense): | ||||||||||||
Interest income | 1,629 | 5,996 | 9,822 | |||||||||
Net foreign exchange gain (loss) | 734 | (3,737 | ) | 1,672 | ||||||||
Other income (expense), net | 1,351 | 161 | (158 | ) | ||||||||
Income before income taxes | 50,245 | 98,137 | 113,427 | |||||||||
Provision for income taxes | 33,160 | 13,310 | 6,394 | |||||||||
Net income | $ | 17,085 | $ | 84,827 | $ | 107,033 | ||||||
Basic earnings per share | $ | 0.22 | $ | 1.08 | $ | 1.35 | ||||||
Weighted average shares outstanding - basic | 77,520 | 78,567 | 79,468 | |||||||||
Diluted earnings per share | $ | 0.22 | $ | 1.07 | $ | 1.32 | ||||||
Weighted average shares outstanding – diluted �� | 78,026 | 79,515 | 81,043 | |||||||||
Dividends declared per share | $ | 0.48 | $ | 0.44 | $ | 0.34 |
For the Years Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2006 | 2005 | 2004 | |||||||||
Cash flow from operating activities: | |||||||||||
Net income | $ | 72,708 | $ | 61,517 | $ | 48,610 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 34,181 | 28,553 | 25,592 | ||||||||
Stock-based compensation | 14,507 | 1,545 | — | ||||||||
Impairment of cost method investment | — | — | 2,500 | ||||||||
Gain on sale of subsidiary | — | — | (242 | ) | |||||||
Provision for (benefit from) deferred income taxes | (339 | ) | 3,219 | (825 | ) | ||||||
Tax benefit from stock option plans | (4,271 | ) | 675 | 3,071 | |||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | (21,502 | ) | (4,080 | ) | (9,342 | ) | |||||
Inventories | (14,311 | ) | (4,572 | ) | (15,230 | ) | |||||
Prepaid expenses and other assets | 2,116 | (2,177 | ) | 4,624 | |||||||
Accounts payable | 1,169 | 4,647 | (4,359 | ) | |||||||
Deferred revenue | 6,190 | 3,847 | 3,385 | ||||||||
Taxes and other liabilities | 7,443 | (5,124 | ) | 7,848 | |||||||
Net cash provided by operating activities | 97,891 | 88,050 | 65,632 | ||||||||
Cash flow from investing activities: | |||||||||||
Proceeds from sale of subsidiary | — | — | 680 | ||||||||
Acquisitions, net of cash received | — | (63,891 | ) | — | |||||||
Capital expenditures | (18,503 | ) | (15,383 | ) | (12,596 | ) | |||||
Capitalization of internally developed software | (7,370 | ) | (13,380 | ) | (5,007 | ) | |||||
Additions to other intangibles | (3,115 | ) | (4,288 | ) | (3,050 | ) | |||||
Purchases of short-term investments | (244,238 | ) | (124,227 | ) | (125,954 | ) | |||||
Sales and maturities of short-term investments | 213,894 | 154,773 | 116,789 | ||||||||
Net cash used in investing activities | (59,332 | ) | (66,396 | ) | (29,138 | ) | |||||
Cash flow from financing activities: | |||||||||||
Proceeds from issuance of common stock | 37,146 | 23,222 | 16,826 | ||||||||
Repurchase of common stock | (16,519 | ) | (49,452 | ) | (16,064 | ) | |||||
Dividends paid | (19,034 | ) | (15,776 | ) | (14,486 | ) | |||||
Tax benefit from stock option plans | 4,271 | — | — | ||||||||
Net cash provided by (used in) financing activities | 5,864 | (42,006 | ) | (13,724 | ) | ||||||
Net change in cash and cash equivalents | 44,423 | (20,352 | ) | 22,770 | |||||||
Cash and cash equivalents at beginning of period | 55,864 | 76,216 | 53,446 | ||||||||
Cash and cash equivalents at end of period | $ | 100,287 | $ | 55,864 | $ | 76,216 | |||||
Cash paid for interest and income taxes | |||||||||||
Interest | $ | 41 | $ | 17 | $ | 31 | |||||
Income taxes | $ | 9,827 | $ | 15,117 | $ | 10,622 |
For the Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Cash flow from operating activities: | ||||||||||||
Net income | $ | 17,085 | $ | 84,827 | $ | 107,033 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 38,365 | 37,103 | 36,605 | |||||||||
Stock-based compensation | 20,299 | 19,854 | 17,754 | |||||||||
Tax expense/(benefit from) deferred income taxes | 17,196 | (4,475 | ) | (16,954 | ) | |||||||
Tax expense/(benefit from) stock option plans | 1,450 | (1,213 | ) | (2,964 | ) | |||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | 17,591 | 12,159 | (14,047 | ) | ||||||||
Inventories | 20,843 | (24,578 | ) | (5,537 | ) | |||||||
Prepaid expenses and other assets | 12,740 | (10,340 | ) | (12,330 | ) | |||||||
Accounts payable | (7,374 | ) | (5,648 | ) | 4,186 | |||||||
Deferred revenue | 11,728 | 9,423 | 13,883 | |||||||||
Taxes and other liabilities | (14,272 | ) | 4,706 | 19,743 | ||||||||
Net cash provided by operating activities | 135,651 | 121,818 | 147,372 | |||||||||
Cash flow from investing activities: | ||||||||||||
Acquisitions, net of cash received | — | (17,310 | ) | — | ||||||||
Capital expenditures | (20,847 | ) | (25,771 | ) | (24,864 | ) | ||||||
Capitalization of internally developed software | (12,583 | ) | (9,487 | ) | (8,263 | ) | ||||||
Additions to other intangibles | (4,602 | ) | (3,010 | ) | (6,447 | ) | ||||||
Purchases of short-term investments | (93,087 | ) | (9,061 | ) | (87,586 | ) | ||||||
Sales and maturities of short-term investments | 19,204 | 86,179 | 143,938 | |||||||||
Purchases of foreign currency option contracts | — | (2,784 | ) | (2,242 | ) | |||||||
Net cash provided by (used in) investing activities | (111,915 | ) | 18,756 | 14,536 | ||||||||
Cash flow from financing activities: | ||||||||||||
Proceeds from issuance of common stock | 21,672 | 31,150 | 36,460 | |||||||||
Repurchase of common stock | (34,585 | ) | (103,641 | ) | (79,728 | ) | ||||||
Dividends paid | (37,308 | ) | (34,735 | ) | (27,052 | ) | ||||||
Tax (expense)/benefit from stock option plans | (1,450 | ) | 1,213 | 2,964 | ||||||||
Net cash (used in) financing activities | (51,671 | ) | (106,013 | ) | (67,356 | ) | ||||||
Net change in cash and cash equivalents | (27,935 | ) | 34,561 | 94,552 | ||||||||
Cash and cash equivalents at beginning of period | 229,400 | 194,839 | 100,287 | |||||||||
Cash and cash equivalents at end of period | $ | 201,465 | $ | 229,400 | $ | 194,839 | ||||||
Cash paid for interest and income taxes: | ||||||||||||
Interest | $ | 23 | $ | 116 | $ | 159 | ||||||
Income taxes | $ | 14,608 | $ | 17,214 | $ | 21,147 |
Common Stock Shares | Common Stock Amount | Additional Paid-In Capital | Deferred Compensation | Retained Earnings | Accumulated Other Comprehensive Income/(Loss) | Total Stockholders' Equity | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at December 31, 2003 | 78,269,235 | $ | 783 | $ | 95,070 | $ | — | $ | 349,994 | $ | (6,395 | ) | $ | 439,452 | |||||||||
Net income | 48,610 | 48,610 | |||||||||||||||||||||
Foreign currency translation adjustment | |||||||||||||||||||||||
(net of $1,013 tax expense) | 3,050 | 3,050 | |||||||||||||||||||||
Unrealized loss on securities available | |||||||||||||||||||||||
for sale (net of $0 tax benefit) | (417 | ) | (417 | ) | |||||||||||||||||||
Unrealized gain on derivative instruments | |||||||||||||||||||||||
(net of $2,136 tax expense) | 6,407 | 6,407 | |||||||||||||||||||||
Total comprehensive income | 57,650 | ||||||||||||||||||||||
Issuance of common stock under employee | |||||||||||||||||||||||
plans, including tax benefits | 1,234,195 | 12 | 19,885 | 19,897 | |||||||||||||||||||
Repurchase and retirement of common | |||||||||||||||||||||||
stock | (557,850 | ) | (6 | ) | (16,058 | ) | (16,064 | ) | |||||||||||||||
Dividends declared | (14,486 | ) | (14,486 | ) | |||||||||||||||||||
Balance at December 31, 2004 | 78,945,580 | $ | 789 | $ | 98,897 | $ | — | $ | 384,118 | $ | 2,645 | $ | 486,449 | ||||||||||
Net income | 61,517 | 61,517 | |||||||||||||||||||||
Foreign currency translation | |||||||||||||||||||||||
adjustment(net of $1,636 tax benefit) | (5,181 | ) | (5,181 | ) | |||||||||||||||||||
Unrealized gain on securities available | |||||||||||||||||||||||
for sale (net of $0 tax expense) | 50 | 50 | |||||||||||||||||||||
Unrealized gain on derivative | |||||||||||||||||||||||
instruments (net of $253 tax expense) | 801 | 801 | |||||||||||||||||||||
Total comprehensive income | 57,187 | ||||||||||||||||||||||
Net activity related to restricted | |||||||||||||||||||||||
stock units | 813,305 | 8 | 18,084 | (16,547 | ) | 1,545 | |||||||||||||||||
Issuance of common stock under employee | |||||||||||||||||||||||
plans, including tax benefits | 1,573,547 | 16 | 23,206 | 23,222 | |||||||||||||||||||
Repurchase and retirement of common | |||||||||||||||||||||||
stock | (2,056,346 | ) | (20 | ) | (49,432 | ) | (49,452 | ) | |||||||||||||||
Dividends declared | (15,776 | ) | (15,776 | ) | |||||||||||||||||||
Disqualified dispositions | 675 | 675 | |||||||||||||||||||||
Balance at December 31, 2005 | 79,276,086 | $ | 793 | $ | 91,430 | ($ 16,547 | ) | $ | 429,859 | ($ 1,685 | ) | $ | 503,850 | ||||||||||
Net income | 72,708 | 72,708 | |||||||||||||||||||||
Foreign currency translation adjustment | |||||||||||||||||||||||
(net of $1,434 tax expense) | 4,542 | 4,542 | |||||||||||||||||||||
Unrealized gain on securities available | |||||||||||||||||||||||
for sale (net of $0 tax expense) | 78 | 78 | |||||||||||||||||||||
Unrealized loss on derivative instruments | |||||||||||||||||||||||
(net of $138 tax benefit) | (436 | ) | (436 | ) | |||||||||||||||||||
Total comprehensive income | 76,892 | ||||||||||||||||||||||
Issuance of common stock under | |||||||||||||||||||||||
employee plans, including tax benefits | 1,915,172 | 19 | 37,127 | 37,146 | |||||||||||||||||||
Stock-based compensation under restricted stock plan | 113,794 | 1 | 5,082 | 5,083 | |||||||||||||||||||
Stock-based compensation under stock option and employee stock purchase plans | 9,424 | 9,424 | |||||||||||||||||||||
Repurchase and retirement of common | |||||||||||||||||||||||
stock | (607,910 | ) | (6 | ) | (16,513 | ) | (16,519 | ) | |||||||||||||||
Effect of adoption of SFAS 123R | (813,305 | ) | (8 | ) | (16,539 | ) | 16,547 | — | |||||||||||||||
Dividends declared | (19,034 | ) | (19,034 | ) | |||||||||||||||||||
Disqualified dispositions | (160 | ) | (160 | ) | |||||||||||||||||||
Balance at December 31, 2006 | $ | 79,883,837 | $ | 799 | $ | 109,851 | $ | — | $ | 483,533 | $ | 2,499 | $ | 596,682 |
Common Stock Shares | Common Stock Amount | Additional Paid-In Capital | Deferred Compensation | Retained Earnings | Accumulated Other Comprehensive Income/(Loss) | Total Stockholders’ Equity | ||||||||||||||||||||||
Balance at December 31, 2006 | 79,883,837 | $ | 799 | $ | 207,808 | $ | — | $ | 385,480 | $ | 2,499 | $ | 596,586 | |||||||||||||||
Net income | 107,033 | 107,033 | ||||||||||||||||||||||||||
Foreign currency translation adjustment (net of $286 tax expense) | 4,483 | 4,483 | ||||||||||||||||||||||||||
Unrealized gain on securities available-for-sale (net of $13 tax expense) | 200 | 200 | ||||||||||||||||||||||||||
Unrealized loss on derivative instruments (net of $7 tax benefit) | (117 | ) | (117 | ) | ||||||||||||||||||||||||
Total comprehensive income | 111,599 | |||||||||||||||||||||||||||
Issuance of common stock under employee plans, including tax benefits | 2,251,657 | 22 | 36,438 | 36,460 | ||||||||||||||||||||||||
Stock-based compensation | 17,754 | 17,754 | ||||||||||||||||||||||||||
Repurchase and retirement of common stock | (2,730,135 | ) | (27 | ) | (7,102 | ) | (72,599 | ) | (79,728 | ) | ||||||||||||||||||
Dividends paid | (27,052 | ) | (27,052 | ) | ||||||||||||||||||||||||
Disqualified dispositions | 5,467 | 5,467 | ||||||||||||||||||||||||||
Balance at December 31, 2007 | 79,405,359 | $ | 794 | $ | 260,365 | $ | — | $ | 392,862 | $ | 7,065 | $ | 661,086 | |||||||||||||||
Net income | 84,827 | 84,827 | ||||||||||||||||||||||||||
Foreign currency translation adjustment (net of $681 tax benefit) | (4,188 | ) | (4,188 | ) | ||||||||||||||||||||||||
Unrealized loss on securities available-for-sale (net of $82 tax benefit) | (502 | ) | (502 | ) | ||||||||||||||||||||||||
Unrealized gain on derivative instruments (net of $1,320 tax expense) | 8,108 | 8,108 | ||||||||||||||||||||||||||
Total comprehensive income | 88,245 | |||||||||||||||||||||||||||
Issuance of common stock under employee plans, including tax benefits | 1,897,746 | 19 | 31,131 | 31,150 | ||||||||||||||||||||||||
Stock-based compensation | 19,854 | 19,854 | ||||||||||||||||||||||||||
Repurchase and retirement of common stock | (4,110,042 | ) | (41 | ) | (13,477 | ) | (90,123 | ) | (103,641 | ) | ||||||||||||||||||
Dividends paid | (34,735 | ) | (34,735 | ) | ||||||||||||||||||||||||
Disqualified dispositions | 2,479 | 2,479 | ||||||||||||||||||||||||||
Balance at December 31, 2008 | 77,193,063 | $ | 772 | $ | 300,352 | $ | — | $ | 352,831 | $ | 10,483 | $ | 664,438 | |||||||||||||||
Net income | 17,085 | 17,085 | ||||||||||||||||||||||||||
Foreign currency translation adjustment (net of $1,799 tax expense) | 927 | 927 | ||||||||||||||||||||||||||
Unrealized gain on securities available-for-sale (net of $1,093 tax expense) | 563 | 563 | ||||||||||||||||||||||||||
Unrealized gain on derivative instruments (net of $3,053 tax expense) | 1,572 | 1,572 | ||||||||||||||||||||||||||
Total comprehensive income | 20,147 | |||||||||||||||||||||||||||
Issuance of common stock under employee plans, including tax benefits | 1,618,252 | 16 | 21,656 | 21,672 | ||||||||||||||||||||||||
Stock-based compensation | 20,574 | 20,574 | ||||||||||||||||||||||||||
Repurchase and retirement of common stock | (1,443,441 | ) | (14 | ) | (5,618 | ) | (28,953 | ) | (34,585 | ) | ||||||||||||||||||
Dividends paid | (37,308 | ) | (37,308 | ) | ||||||||||||||||||||||||
Disqualified dispositions | (518 | ) | (518 | ) | ||||||||||||||||||||||||
Balance at December 31, 2009 | 77,367,874 | $ | 774 | $ | 336,446 | $ | — | $ | 303,655 | $ | 13,545 | $ | 654,420 |
APIC | RE | |||||||
2006 Beginning Balance | ||||||||
12/31/06 balance as previously reported | $ | 109,851 | $ | 483,437 | ||||
Cumulative reclassification of share repurchase | 97,957 | (97,957 | ) | |||||
12/31/06 balance as reported in current Form 10-K | $ | 207,808 | $ | 385,480 | ||||
2007 Activity | ||||||||
Repurchase and retirement of common stock as previously reported | $ | (79,701 | ) | $ | — | |||
Reclassification of 2007 activity | 72,599 | (72,599 | ) | |||||
Repurchase and retirement of common stock as reported in current Form 10-K | $ | (7,102 | ) | $ | (72,599 | ) | ||
2007 Ending Balance | ||||||||
12/31/07 balance as previously reported | $ | 89,809 | $ | 563,418 | ||||
Cumulative reclassification of share repurchase | 170,556 | (170,556 | ) | |||||
12/31/07 balance as reported in current Form 10-K | $ | 260,365 | $ | 392,862 | ||||
2008 Activity | ||||||||
Repurchase and retirement of common stock as previously reported | $ | (103,600 | ) | $ | — | |||
Reclassification of 2008 activity | 90,123 | (90,123 | ) | |||||
Repurchase and retirement of common stock as reported in current Form 10-K | $ | (13,477 | ) | $ | (90,123 | ) | ||
2008 Ending Balance | ||||||||
12/31/08 balance as previously reported | $ | 39,673 | $ | 613,510 | ||||
Cumulative reclassification of share repurchase | 260,679 | (260,679 | ) | |||||
12/31/08 balance as reported in current Form 10-K | $ | 300,352 | $ | 352,831 |
Judgments and estimates are required in the
Short-term
Short-term available-for-sale are valued using the market approach (Level 1) based on unadjusted quoted prices in active markets for identical assets at the measurement date. Our short-term investments also include auction rate securities that we originally purchased for $8.6 million. These auction rate securities consist of corporate, state and municipaleducation loan revenue bonds. Auction rate securities with readily determinableare variable rate debt instruments whose interest rates are typically reset approximately every 7 to 35 days. In November 2008, we accepted the UBS Auction Rate Securities Rights (“the Rights”) agreement offered by UBS as a liquidity alternative to the failed auction process. The Rights agreement is a nontransferable right to sell our auction rate securities, at par value, back to UBS at any time during the period June 30, 2010, through July 2, 2012. The estimated fair market valuesvalue of both the auction rate securities and maturitiesthe Rights agreement was determined using significant unobservable inputs (Level 3) as prescribed by FASB ASC 820.
our sales returns allowance. Our allowance for doubtful accounts is based on historical experience. We analyze historical bad debts, customer concentrations, customer creditworthiness and current economic trends when evaluating the adequacy of our allowance for doubtful accounts.
Year | Description | Balance at Beginning of Period | Provisions | Write-Offs | Balance at End of Period | ||||||||||||
2007 | Allowance for doubtful accounts and sales returns | $ | 4,360 | $ | 1,940 | $ | 698 | $ | 5,602 | ||||||||
2008 | Allowance for doubtful accounts and sales returns | 5,602 | 447 | 367 | 5,682 | ||||||||||||
2009 | Allowance for doubtful accounts and sales returns | 5,682 | 337 | 1,400 | 4,619 |
The excess purchase price over the fair value of assets acquired is recorded as goodwill. As we have one operating segment, we allocate goodwill to one reporting unit for goodwill impairment testing. In accordance with SFAS 142,FASB ASC 350, Intangibles – Goodwill and Other Intangible Assets, (FASB ASC 350), goodwill is tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach.approach based on the market capitalization of the reporting unit. Our annual impairment test was performed on April 6, 2006.as of February 28, 2009. No impairment of goodwill was identified.has been identified during the period presented. Goodwill is deductible for tax purposes in certain jurisdictions.
Financial
with varying maturity dates. Our counterparties in our foreign currency forward and option contracts are major financial institutions. We do not anticipate nonperformance by these counterparties. We maintain cash(See Note 4 – Derivative instruments and cash equivalents with various financial institutions locatedhedging activities in many countries worldwide. Our short-term investments are diversified among and limitedNotes to high-quality securities with high credit ratings. Consolidated Financial Statements).
Salesseparately.
Provision
all periods presented.
2006 | 2005 | |||||||
---|---|---|---|---|---|---|---|---|
Balance at the beginning of the period | $ | 915 | $ | 815 | ||||
Accruals for warranties issued during the period | 1,593 | 1,652 | ||||||
Settlements made (in cash or in kind) during the period | (1,641 | ) | (1,552 | ) | ||||
Balance at the end of the period | $ | 867 | $ | 915 | ||||
2009 | 2008 | |||||||
Balance at the beginning of the period | $ | 952 | $ | 750 | ||||
Accruals for warranties issued during the period | 1,991 | 1,836 | ||||||
Settlements made (in cash or in kind) during the period | (2,022 | ) | (1,634 | ) | ||||
Balance at the end of the period | $ | 921 | $ | 952 |
On January 21, 2004, we declared a stock split effected in the form of a dividend of one share of common stock for each two shares of common stock outstanding. The dividend was paid on February 20, 2004 to holders of record as of the close of business on February 5, 2004. All per share data and numbers of common shares, where appropriate, have been retroactively adjusted to reflect the stock split.
Years Ended December 31, | |||||||
---|---|---|---|---|---|---|---|
2006 | 2005 | 2004 | |||||
Weighted average shares outstanding-basic | 79,519 | 78,552 | 78,680 | ||||
Plus: Common share equivalents | |||||||
Stock options, restricted stock units | 2,000 | 2,358 | 3,416 | ||||
Weighted average shares outstanding-diluted | 81,519 | 80,910 | 82,096 | ||||
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Weighted average shares outstanding-basic�� | 77,520 | 78,567 | 79,468 | |||||||||
Plus: Common share equivalents | ||||||||||||
Stock options, restricted stock units | 506 | 948 | 1,575 | |||||||||
Weighted average shares outstanding-diluted | 78,026 | 79,515 | 81,043 |
Prior
As of December 31, 2009 | As of December 31, 2008 | |||||||
Cash and cash equivalents: | ||||||||
Cash | $ | 85,612 | $ | 100,967 | ||||
Cash equivalents: | ||||||||
Time deposits | — | 73,400 | ||||||
Money market accounts | 115,853 | 55,033 | ||||||
Total cash and cash equivalents | $ | 201,465 | $ | 229,400 | ||||
Short-term investments: | ||||||||
Municipal bonds | $ | 12,549 | $ | 6,220 | ||||
Corporate bonds | 7,587 | — | ||||||
U.S. treasuries and agencies | 21,033 | — | ||||||
Foreign government bonds | 34,674 | — | ||||||
Time deposits | 2,753 | — | ||||||
Auction rate securities | 8,177 | — | ||||||
Auction rate securities put option | 423 | — | ||||||
Total short-term investments | 87,196 | 6,220 | ||||||
Long-term investments: | ||||||||
Auction rate securities | — | 6,964 | ||||||
Auction rate securities put option | — | 1,636 | ||||||
Other long-term investments | — | 1,900 | ||||||
Total investments | $ | 87,196 | $ | 16,720 | ||||
Total cash, cash equivalents and investments | $ | 288,661 | $ | 246,120 |
As of December 31, 2009 | ||||||||||||||||||||
Adjusted Cost | Gross Unrealized Gain | Gross Unrealized Loss | Cumulative Translation Adjustment | Fair Value | ||||||||||||||||
Municipal bonds | $ | 12,491 | $ | 58 | $ | — | $ | — | $ | 12,549 | ||||||||||
Corporate bonds | 7,478 | 110 | (1 | ) | — | 7,587 | ||||||||||||||
U.S. treasuries and agencies | 21,080 | — | (47 | ) | — | 21,033 | ||||||||||||||
Foreign government bonds | 36,105 | 76 | — | (1,507 | ) | 34,674 | ||||||||||||||
Time deposits | 2,753 | — | — | — | 2,753 | |||||||||||||||
Auction rate securities | 8,600 | — | (423 | ) | — | 8,177 | ||||||||||||||
Auction rate securities put option | — | 423 | — | — | 423 | |||||||||||||||
Total investments | $ | 88,507 | $ | 667 | $ | (471 | ) | $ | (1,507 | ) | $ | 87,196 |
As of December 31, 2008 | ||||||||||||||||
Adjusted Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | |||||||||||||
Municipal securities | $ | 6,199 | $ | 28 | $ | (7 | ) | $ | 6,220 | |||||||
Auction rate securities | 8,600 | — | (1,636 | ) | 6,964 | |||||||||||
Auction rate securities put option | — | 1,636 | — | 1,636 | ||||||||||||
Other long-term investments | 1,900 | — | — | 1,900 | ||||||||||||
Total investments | $ | 16,699 | $ | 1,664 | $ | (1,643 | ) | $ | 16,720 |
As of December 31, 2009 | ||||||||
Adjusted Cost | Fair Value | |||||||
Due in less than 1 year | $ | 44,029 | $ | 43,267 | ||||
Due in 1 to 5 years | 44,478 | 43,929 | ||||||
Total investments | $ | 88,507 | $ | 87,196 |
As of December 31, 2009 | ||||||||
Due in less than 1 year | Adjusted Cost | Fair Value | ||||||
Municipal bonds | $ | 4,103 | $ | 4,110 | ||||
Corporate bonds | 5,384 | 5,473 | ||||||
U.S. treasuries and agencies | 5,065 | 5,057 | ||||||
Foreign government bonds | 18,124 | 17,274 | ||||||
Time deposits | 2,753 | 2,753 | ||||||
Auction rate securities | 8,600 | 8,177 | ||||||
Auction rate securities put option | — | 423 | ||||||
Total investments | $ | 44,029 | $ | 43,267 |
As of December 31, 2009 | ||||||||
Due in 1 to 5 years | Adjusted Cost | Fair Value | ||||||
Municipal bonds | $ | 8,388 | $ | 8,439 | ||||
Corporate bonds | 2,094 | 2,114 | ||||||
U.S. treasuries and agencies | 16,015 | 15,976 | ||||||
Foreign government bonds | 17,981 | 17,400 | ||||||
Time deposits | — | — | ||||||
Auction rate securities | — | — | ||||||
Auction rate securities put option | — | — | ||||||
Total investments | $ | 44,478 | $ | 43,929 |
Prior tosignificantly decreased. The update also includes guidance on identifying circumstances that indicate a transaction is not orderly. We adopted the effective date of SFAS 123R, we applied Accounting Principles Board Opinion 25 (“APB 25”),“Accounting for Stock Issued to Employees”update on April 1, 2009 and related interpretations forit did not have a material impact on our stock option grants. APB 25 providesfair value measurements.
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Description | December 31, 2009 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets | ||||||||||||||||
Money Market Funds | $ | 115,853 | $ | 115,853 | $ | — | $ | — | ||||||||
Short-term investments available-for-sale | 87,196 | 78,596 | — | 8,600 | ||||||||||||
Derivatives | 11,016 | — | 11,016 | — | ||||||||||||
Total Assets | $ | 214,065 | $ | 194,449 | $ | 11,016 | $ | 8,600 | ||||||||
Liabilities | ||||||||||||||||
Derivatives | $ | (318 | ) | $ | — | $ | (318 | ) | $ | — | ||||||
Total Liabilities | $ | (318 | ) | $ | — | $ | (318 | ) | $ | — |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||
Short-term investments available-for-sale | ||||
Beginning Balance, January 1, 2008 | $ | 8,600 | ||
Total gains (realized/unrealized) | ||||
Included in earnings | 423 | |||
Included in other comprehensive income | — | |||
Total losses (realized/unrealized) | ||||
Included in earnings | (423 | ) | ||
Included in other comprehensive income | — | |||
Purchases, issuances and settlements | — | |||
Transfer in and/or out of Level 3 | — | |||
Ending Balance, December 31, 2009 | $ | 8,600 | ||
The amount of total gains or (losses) for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at the reporting date | $ | — |
up to 24 months. At December 31, 2008, we held forward contracts with a notional amount of $54.9 million dollar equivalent of Euro, $6.2 million dollar equivalent of British pound sterling, $18.9 million dollar equivalent of Japanese yen, $4.7 million dollar equivalent of South Korean won and $21.7 million dollar equivalent of Hungarian forint.
In thousands | Asset Derivatives | |||||||||
December 31, 2009 | December 31, 2008 | |||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||
Derivatives designated as hedging instruments under FASB ASC 815 | ||||||||||
Foreign exchange contracts – ST forwards | Prepaid expenses and other current assets | $ | 7,947 | Prepaid expenses and other current assets | $ | 5,260 | ||||
Foreign exchange contracts – LT forwards | Other long-term assets | 274 | Other long-term assets | 2,654 | ||||||
Foreign exchange contracts – ST options | Prepaid expenses and other current assets | 1,821 | Prepaid expenses and other current assets | 5,705 | ||||||
Foreign exchange contracts – LT options | Other long-term assets | — | Other long-term assets | 3,838 | ||||||
Total derivatives designated as hedging instruments under FASB ASC 815 | $ | 10,042 | $ | 17,457 | ||||||
Derivatives not designated as hedging instruments under FASB ASC 815 | ||||||||||
Foreign exchange contracts – ST forwards | Prepaid expenses and other current assets | $ | 974 | Prepaid expenses and other current assets | $ | 2,745 | ||||
Total derivatives not designated as hedging instruments under FASB ASC 815 | $ | 974 | $ | 2,745 | ||||||
Total derivatives | $ | 11,016 | $ | 20,202 |
Liability Derivatives | ||||||||||
December 31, 2009 | December 31, 2008 | |||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||
Derivatives designated as hedging instruments under FASB ASC 815 | ||||||||||
Foreign exchange contracts – ST forwards | Accrued expenses and other liabilities | $ | — | Accrued expenses and other liabilities | $ | (1,803 | ) | |||
Foreign exchange contracts – LT forwards | Other long-term liabilities | — | Other long-term liabilities | — | ||||||
Foreign exchange contracts – ST options | Accrued expenses and other liabilities | — | Accrued expenses and other liabilities | — | ||||||
Foreign exchange contracts – LT options | Other long-term liabilities | — | Other long-term liabilities | — | ||||||
Total derivatives designated as hedging instruments under FASB ASC 815 | $ | — | $ | (1,803 | ) | |||||
Derivatives not designated as hedging instruments under FASB ASC 815 | ||||||||||
Foreign exchange contracts – ST forwards | Accrued expenses and other liabilities | $ | (318 | ) | Accrued expenses and other liabilities | $ | (3,280 | ) | ||
Total derivatives not designated as hedging instruments under FASB ASC 815 | $ | (318 | ) | $ | (3,280 | ) | ||||
Total derivatives | $ | (318 | ) | $ | (5,083 | ) |
Derivatives in FASB ASC 815 Cash Flow Hedging Relationship | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) (in thousands) | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (in thousands) | Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) | Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) | |||||||||
2009 | 2009 | 2009 | ||||||||||||
Foreign exchange contracts – forwards and options | $ | (6,304 | ) | Net sales | $ | 1,399 | Net foreign exchange gain (loss) | $ | 1,132 | |||||
Foreign exchange contracts – forwards and options | 2,055 | Cost of sales | (74 | ) | Net foreign exchange gain (loss) | (41 | ) | |||||||
Foreign exchange contracts – forwards and options | 1,427 | Operating expenses | 517 | Net foreign exchange gain (loss) | 81 | |||||||||
Total | $ | (2,822 | ) | $ | 1,842 | $ | 1,172 |
Derivatives not Designated as Hedging Instruments under FASB ASC 815 | Location of Gain (Loss) Recognized in Income on Derivative | Amount of Gain (Loss) Recognized in Income on Derivative | |||
2009 | |||||
Foreign exchange contracts – forwards | Net foreign exchange gain/(loss) | $ | (1,669 | ) | |
Total | $ | (1,669 | ) |
December 31, | ||||||||
2009 | 2008 | |||||||
Raw materials | $ | 42,121 | $ | 48,004 | ||||
Work-in-process | 2,042 | 4,150 | ||||||
Finished goods | 42,352 | 55,204 | ||||||
$ | 86,515 | $ | 107,358 |
December 31, | ||||||||
2009 | 2008 | |||||||
Land | $ | 17,076 | $ | 7,210 | ||||
Buildings | 138,367 | 136,802 | ||||||
Furniture and equipment | 154,558 | 144,979 | ||||||
310,001 | 288,991 | |||||||
Accumulated depreciation | (156,736 | ) | (134,514 | ) | ||||
$ | 153,265 | $ | 154,477 |
2009 | 2008 | |||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
Capitalized software development costs | $ | 38,928 | $ | (20,455 | ) | $ | 18,473 | $ | 25,610 | $ | (11,344 | ) | $ | 14,266 | ||||||||||
Acquired technology | 28,022 | (20,967 | ) | 7,055 | 27,503 | (16,804 | ) | 10,699 | ||||||||||||||||
Patents | 19,033 | (5,377 | ) | 13,656 | 16,068 | (4,506 | ) | 11,562 | ||||||||||||||||
Other | 12,577 | (8,371 | ) | 4,206 | 11,401 | (6,013 | ) | 5,388 | ||||||||||||||||
$ | 98,560 | $ | (55,170 | ) | $ | 43,390 | $ | 80,582 | $ | (38,667 | ) | $ | 41,915 |
Amount (in thousands) | ||||
2010 | $ | 18,097 | ||
2011 | 12,986 | |||
2012 | 7,187 | |||
2013 | 1,868 | |||
2014 | 1,186 | |||
Thereafter | 2,066 | |||
$ | 43,390 |
Fiscal Year | Cost of Sales | Acquisition related costs and amortization, net | Total | |||||||||
2010 | $ | 2,701 | $ | 369 | $ | 3,070 | ||||||
2011 | 2,160 | 221 | 2,381 | |||||||||
2012 | 1,126 | 206 | 1,332 | |||||||||
2013 | 87 | 75 | 162 | |||||||||
Thereafter | — | — | — | |||||||||
Total | $ | 6,074 | $ | 871 | $ | 6,945 |
Amount (in thousands) | ||||
Balance as of December 31, 2007 | $ | 54,111 | ||
Acquisitions/purchase accounting adjustments | 10,818 | |||
Divestitures | — | |||
Foreign currency translation impact | (368 | ) | ||
Balance as of December 31, 2008 | $ | 64,561 | ||
Acquisitions/purchase accounting adjustments | — | |||
Divestitures | — | |||
Foreign currency translation impact | 218 | |||
Balance as of December 31, 2009 | $ | 64,779 |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Domestic | $ | 34,953 | $ | 15,921 | $ | 31,685 | ||||||
Foreign | 15,292 | 82,216 | 81,742 | |||||||||
$ | 50,245 | $ | 98,137 | $ | 113,427 |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Current tax expense: | ||||||||||||
U.S. federal | $ | 3,117 | $ | 14,631 | $ | 15,957 | ||||||
State | 136 | 1,391 | 1,155 | |||||||||
Foreign | 13,760 | 18,910 | 9,925 | |||||||||
Total current | 17,013 | 34,932 | 27,037 | |||||||||
Deferred tax expense (benefit): | ||||||||||||
U.S. federal | 9,920 | (11,008 | ) | 628 | ||||||||
State | 387 | (373 | ) | (156 | ) | |||||||
Foreign | (2,864 | ) | (1,570 | ) | (2,783 | ) | ||||||
Total deferred | 7,443 | (12,951 | ) | (2,311 | ) | |||||||
Change in valuation allowance | 8,704 | (8,671 | ) | (18,332 | ) | |||||||
Total provision | $ | 33,160 | $ | 13,310 | $ | 6,394 |
December 31, | ||||||||
2009 | 2008 | |||||||
Capitalized software | $ | 5,978 | $ | 4,615 | ||||
Depreciation and amortization | 10,577 | 9,536 | ||||||
Unrealized gain on derivative instruments | — | 4,153 | ||||||
Undistributed earnings of foreign subsidiaries | 9,278 | 10,075 | ||||||
Gross deferred tax liabilities | 25,833 | 28,379 | ||||||
Operating loss carryforwards | (57,422 | ) | (43,360 | ) | ||||
Intangible assets | (44,159 | ) | (58,987 | ) | ||||
Vacation and other accruals | (3,700 | ) | (4,890 | ) | ||||
Inventory valuation and warranty provisions | (6,702 | ) | (12,665 | ) | ||||
Doubtful accounts and sales provisions | (1,088 | ) | (1,512 | ) | ||||
Unrealized exchange loss | (917 | ) | (1,345 | ) | ||||
Deferred revenue . | (853 | ) | (71 | ) | ||||
Accrued rent expenses | (111 | ) | (117 | ) | ||||
Accrued legal expenses | (710 | ) | (1,466 | ) | ||||
Unrealized loss on derivative instruments | (242 | ) | — | |||||
10% minority stock investment | (900 | ) | (920 | ) | ||||
Stock-based compensation | (4,483 | ) | (5,353 | ) | ||||
Research and development tax credit carryforward | (2,054 | ) | — | |||||
Foreign tax credit carryforward | (1,775 | ) | — | |||||
Other | (657 | ) | (783 | ) | ||||
Gross deferred tax assets | (125,773 | ) | (131,469 | ) | ||||
Valuation allowance | 99,862 | 85,815 | ||||||
Net deferred tax liability (asset) | $ | (78 | ) | $ | (17,275 | ) |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
U.S. federal statutory tax rate | 35 | % | 35 | % | 35 | % | ||||||
Domestic production activities | — | — | (1 | ) | ||||||||
Foreign taxes (less) than federal statutory rate | (6 | ) | (9 | ) | (14 | ) | ||||||
Change in valuation allowance | 17 | (9 | ) | (16 | ) | |||||||
Research and development tax credit | (4 | ) | (2 | ) | (1 | ) | ||||||
Tax exempt interest | — | (1 | ) | (1 | ) | |||||||
State income taxes, net of federal tax benefit | 1 | 1 | 1 | |||||||||
Employee share-based compensation | 7 | 2 | 2 | |||||||||
Intercompany profit | 15 | (5 | ) | — | ||||||||
Other | 1 | 2 | 1 | |||||||||
Effective tax rate | 66 | % | 14 | % | 6 | % |
2008 foreign taxes (less) than federal statutory rate as reported in prior year Form 10-K | (14 | ) | ||
Reclassification (a) | 5 | |||
2008 foreign taxes (less) than federal statutory rate as reported in current year Form 10-K | (9 | ) | ||
2008 intercompany profit as reported in prior year Form 10-K | — | |||
Reclassification (a) | (5 | ) | ||
2008 intercompany profit as reported in current year Form 10-K | (5 | ) |
Had we previously recognized compensation costs as prescribed by SFAS 123, previously reported net income, basic earnings per share and diluted earnings per share would have changed to the pro forma amounts shown below (in thousands, except per share amounts):
Years Ended December 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2005 | 2004 | |||||||
Net income, as reported | $ | 61,517 | $ | 48,610 | ||||
Stock-based compensation included in reported net income, | ||||||||
net of related tax effects | 959 | — | ||||||
Total stock-based compensation expense determined under | ||||||||
fair value method for all awards, net of related tax effects | (13,998 | ) | (12,741 | ) | ||||
Pro-forma net income | $ | 48,478 | $ | 35,869 | ||||
Earnings per share: | ||||||||
Basic - as reported | $ | 0.78 | $ | 0.62 | ||||
Basic - pro-forma | $ | 0.62 | $ | 0.46 | ||||
Diluted - as reported | $ | 0.76 | $ | 0.59 | ||||
Diluted - pro-forma | $ | 0.60 | $ | 0.44 |
Pro-forma disclosuresestablished for the excess tax deductible goodwill to reflect the tax benefit we expected to realize in future periods.
the beginning and ending amount of unrecognized tax benefit is as follows (in thousands):
2009 | 2008 | |||||||
Balance at beginning of period | $ | 9,364 | $ | 8,273 | ||||
Additions based on tax positions related to the current year | 2,060 | 1,946 | ||||||
Additions for tax positions of prior years | 1,272 | 366 | ||||||
Reductions as a result of the lapse of the applicable statute of limitations | (1,634 | ) | (1,221 | ) | ||||
Balance at end of period | $ | 11,062 | $ | 9,364 |
Number of shares under option | Weighted average exercise price | |||||||
---|---|---|---|---|---|---|---|---|
Outstanding at December 31, 2003 | 9,726,418 | $ | 18.07 | |||||
Exercised | (882,539 | ) | 9.60 | |||||
Canceled | (325,912 | ) | 27.66 | |||||
Granted | 1,262,599 | 29.71 | ||||||
Outstanding at December 31, 2004 | 9,780,566 | $ | 20.02 | |||||
Exercised | (1,188,614 | ) | 10.72 | |||||
Canceled | (358,444 | ) | 29.49 | |||||
Granted | 244,725 | 24.24 | ||||||
Outstanding at December 31, 2005 | 8,478,233 | $ | 21.05 | |||||
Exercised | (1,398,617 | ) | 13.16 | |||||
Canceled | (164,943 | ) | 27.32 | |||||
Granted | 0 | 0 | ||||||
Outstanding at December 31, 2006 | 6,914,673 | $ | 22.49 | |||||
Options exercisable at December 31: | ||||||||
2004 | 6,353,236 | $ | 17.23 | |||||
2005 | 5,946,139 | 19.10 | ||||||
2006 | 5,384,470 | 21.53 |
Number of shares under option | Weighted average fair value | |||||||
---|---|---|---|---|---|---|---|---|
Weighted average, grant date fair value of options granted during: | ||||||||
2004 | 1,262,599 | $ | 16.72 | |||||
2005 | 244,725 | 12.85 | ||||||
2006 | 0 | 0 |
Number of shares under option | Weighted average exercise price | |||||||
Outstanding at December 31, 2006 | 6,914,673 | $ | 22.49 | |||||
Exercised | (1,515,107 | ) | 15.22 | |||||
Canceled | (104,925 | ) | 27.33 | |||||
Granted | — | — | ||||||
Outstanding at December 31, 2007 | 5,294,641 | $ | 24.47 | |||||
Exercised | (925,743 | ) | 17.30 | |||||
Canceled | (96,331 | ) | 26.98 | |||||
Granted | — | — | ||||||
Outstanding at December 31, 2008 | 4,272,567 | $ | 25.97 | |||||
Exercised | (379,630 | ) | 15.40 | |||||
Canceled | (181,434 | ) | 26.80 | |||||
Granted | — | — | ||||||
Outstanding at December 31, 2009 | 3,711,503 | $ | 26.93 | |||||
Options exercisable at December 31: | ||||||||
2007 | 4,368,972 | $ | 24.17 | |||||
2008 | 3,812,334 | 26.00 | ||||||
2009 | 3,493,574 | 26.94 |
Outstanding and Exercisable by Price Range As of December 31, 2006 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Options Outstanding | Options Exercisable | ||||||||||||||||
Range of Exercise prices | Number outstanding as of 12/31/2006 | Weighted average remaining contractual life | Weighted average exercise price | Number exercisable as of 12/31/2006 | Weighted average exercise price | ||||||||||||
$8.6667 -$12.2222 | 1,072,535 | 1.27 | $ | 10.98 | 1,045,669 | $ | 10.9677 | ||||||||||
12.3611 - 15.3055 | 976,976 | 1.54 | $ | 15.23 | 967,192 | $ | 15.2258 | ||||||||||
15.5555 - 21.0417 | 1,720,096 | 5.18 | $ | 20.64 | 1,223,332 | $ | 20.6330 | ||||||||||
21.2533 - 29.5400 | 839,349 | 6.80 | $ | 25.53 | 538,372 | $ | 25.5261 | ||||||||||
29.8500 - 34.3750 | 2,305,717 | 5.60 | $ | 31.19 | 1,609,905 | $ | 31.5078 | ||||||||||
$8.6667 - $34.3750 | 6,914,673 | 3.94 | $ | 22.4883 | 5,384,470 | $ | 21.5254 | ||||||||||
Outstanding and Exercisable by Price Range as of December 31, 2009 | ||||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||
Range of Exercise prices | Number outstanding as of 12/31/2009 | Weighted average remaining contractual life | Weighted average exercise price | Number exercisable as of 12/31/2009 | Weighted average exercise price | |||||||||||||||||
$16.08 – $21.95 | 1,238,441 | 1.74 | $ | 20.69 | 1,188,337 | $ | 20.71 | |||||||||||||||
$22.30 – $29.85 | 1,257,625 | 3.90 | $ | 28.15 | 1,098,218 | $ | 28.08 | |||||||||||||||
$30.51 – $34.38 | 1,215,437 | 0.41 | $ | 32.02 | 1,207,019 | $ | 32.02 | |||||||||||||||
$16.08 – $34.38 | 3,711,503 | 2.04 | $ | 26.93 | 3,493,574 | $ | 26.94 |
2005 | 2004 | |||||||
---|---|---|---|---|---|---|---|---|
Dividend expense yield | 0.2% | 0.2% | ||||||
Expected life | 5.5 years | 5.5 years | ||||||
Expected volatility | 43.3% | 53.2% | ||||||
Risk-free interest rate | 4.0% | 2.7% |
RSUs | ||||||||
---|---|---|---|---|---|---|---|---|
Number of RSUs | Weighted Average Grant Price | |||||||
Balance at January 1, 2005 | 0 | $ | 0.00 | |||||
Granted | 813,305 | $ | 22.24 | |||||
Earned | 0 | $ | 0.00 | |||||
Canceled | (15,000 | ) | $ | 22.12 | ||||
Balance at December 31, 2005 | 798,305 | $ | 22.24 | |||||
Granted | 693,805 | $ | 32.21 | |||||
Earned | (113,794 | ) | $ | 31.67 | ||||
Canceled | (53,383 | ) | $ | 25.93 | ||||
Balance at December 31, 2006 | 1,324,933 | $ | 26.77 | |||||
RSUs | ||||||||
Number of RSUs | Weighted Average Grant Price | |||||||
Balance at January 1, 2007 | 1,324,933 | $ | 26.77 | |||||
Granted | 801,780 | $ | 27.90 | |||||
Earned | (209,303 | ) | $ | 27.85 | ||||
Canceled | (75,776 | ) | $ | 27.64 | ||||
Balance at December 31, 2007 | 1,841,634 | $ | 26.86 | |||||
Granted | 763,182 | $ | 28.51 | |||||
Earned | (320,251 | ) | $ | 29.42 | ||||
Canceled | (119,337 | ) | $ | 28.19 | ||||
Balance at December 31, 2008 | 2,165,228 | $ | 26.99 | |||||
Granted | 604,083 | $ | 21.80 | |||||
Earned | (407,156 | ) | $ | 22.04 | ||||
Canceled | (57,721 | ) | $ | 27.88 | ||||
Balance at December 31, 2009 | 2,304,434 | $ | 26.48 |
2006 | 2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dividend expense yield | 0.2% | 0.2% | 0.2% | ||||||||
Expected life | 3 months | 6 months | 6 months | ||||||||
Expected volatility | 29% | 29% | 35% | ||||||||
Risk-free interest rate | 4.5% | 3.2% | 1.0% |
2009 | 2008 | 2007 | ||||||||||
Dividend expense yield | 0.5% | 0.3% | 0.3% | |||||||||
Expected life | 3 months | 3 months | 3 months | |||||||||
Expected volatility | 45% | 26% | 23% | |||||||||
Risk-free interest rate | 0.8% | 3.8% | 5.0% |
Number of shares | Weighted average fair value | |||||||
---|---|---|---|---|---|---|---|---|
2004 | 380,211 | $ | 7.73 | |||||
2005 | 467,932 | 6.08 | ||||||
2006 | 539,541 | 6.62 |
Plan are as follows:
Number of shares | Weighted average fair value | |||||||
2007 | 549,719 | $ | 6.19 | |||||
2008 | 679,983 | 5.86 | ||||||
2009 | 838,536 | 5.75 |
2009 | 2008 | 2007 | ||||||||||
Stock-based compensation | ||||||||||||
Total cost of sales | $ | 1,284 | $ | 1,063 | $ | 911 | ||||||
Sales and marketing | 8,774 | 8,479 | 7,322 | |||||||||
Research and development | 7,236 | 7,121 | 6,435 | |||||||||
General and administrative | 3,005 | 3,084 | 2,866 | |||||||||
Provision for income taxes | (3,765 | ) | (4,601 | ) | (3,839 | ) | ||||||
Total | $ | 16,534 | $ | 15,146 | $ | 13,695 |
Comprehensive income
Our comprehensive income is comprised of net income, foreign currency translation and unrealized gains and losses on forward and option contracts and securities available for sale. Comprehensive income for 2006, 2005 and 2004 was $76.9 million, $57.2 million and $57.7 million, respectively.
Recently issued accounting pronouncements
In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) 48,Accounting for Uncertainty in Income Taxes – an interpretation of Statement of Financial Accounting Standards (“SFAS”) 109. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS 109,Accounting for Income Taxes. It prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. This interpretation is effective for fiscal years beginning after December 15, 2006. We adopted FIN 48 on January 1, 2007 as required. The cumulative effect of adopting FIN 48 was recorded in retained earnings upon adoption. The adoption of FIN 48 did not have a significant impact on our financial position or results of operations.
In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) 108 regarding the process of quantifying financial statement misstatements. SAB 108 states that registrants should use both a balance sheet approach and an income statement approach when quantifying and evaluating the materiality of a misstatement. The interpretations in SAB 108 contain guidance on correcting errors under the dual approach as well as provide transition guidance for correcting errors. This interpretation does not change the requirements within SFAS 154,Accounting Changes and Error Corrections – a replacement of APB 20 and FASB Statement 3, for the correction of an error on financial statements. SAB 108 is effective for annual financial statements covering the first fiscal year ending after November 15, 2006. We adopted this interpretation on December 31, 2006. The adoption of SAB 108 did not have a significant effect on our consolidated financial statements.
In September 2006, the FASB issued SFAS 157,Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America, and expands disclosure about fair value measurements. This pronouncement applies under other accounting standards that require or permit fair value measurements. Accordingly, this statement does not require any new fair value measurement. This statement is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We will be required to adopt SFAS 157 in the first quarter of fiscal year 2008. We are currently evaluating the requirements of SFAS 157 and have not yet determined the impact on our consolidated financial statements.
In March 2006, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue 06-3,How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (that is, Gross versus Net Presentation). Taxes within the scope of EITF Issue 06-3 include any taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer and may include, but are not limited to, sales taxes, use taxes, value-added taxes, and some excise taxes. The EITF concluded that the presentation of these taxes on either a gross (included in revenues and costs) or a net (excluded from revenue) basis is an accounting policy decision that should be disclosed. For any such taxes that are reported on a gross basis, a company should disclose the amounts of those taxes in interim and annual financial statements. Our policy is to exclude all such taxes from revenue. The provisions of EITF 06-3 are effective for interim and annual reporting periods beginning after December 15, 2006. The adoption of EITF 06-3 will not have any effect on our consolidated financial statements.
Short-term investments at December 31, 2006 and 2005, consisting of corporate, state and municipal securities, were acquired at an aggregate cost of $150.2 million and $119.8 million, respectively. The contractual maturities of these securities, which are classified as available-for-sale and carried at fair value, are as follows (in thousands):
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2006 | 2005 | |||||||
Less than 90 days | $ | 73,787 | $ | 61,855 | ||||
90 days to one year | 31,309 | 42,222 | ||||||
One year through two years | 38,559 | 11,877 | ||||||
Two years or more | 6,535 | 3,892 | ||||||
$ | 150,190 | $ | 119,846 | |||||
Inventories, net consist of the following (in thousands):
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2006 | 2005 | |||||||
Raw materials | $ | 38,270 | $ | 28,497 | ||||
Work-in-process | 4,321 | 4,634 | ||||||
Finished goods | 34,547 | 29,696 | ||||||
$ | 77,138 | $ | 62,827 | |||||
Property and equipment consist of the following (in thousands):
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2006 | 2005 | |||||||
Land | $ | 7,165 | $ | 7,085 | ||||
Buildings | 125,228 | 124,428 | ||||||
Furniture and equipment | 110,710 | 91,073 | ||||||
243,103 | 222,586 | |||||||
Accumulated depreciation | (97,678 | ) | (78,256 | ) | ||||
$ | 145,425 | $ | 144,330 | |||||
Depreciation expense for the years ended December 31, 2006, 2005 and 2004, was $20.2 million, $17.8 million and $17.3 million, respectively.
Intangibles at December 31, 2006 and 2005 are as follows:
2006 | 2005 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||
Capitalized software development costs | $ | 57,571 | $ | (41,791 | ) | $ | 15,780 | $ | 50,201 | $ | (32,651 | ) | $ | 17,550 | ||||||
Acquired technology | 20,814 | (9,734 | ) | 11,080 | 20,257 | (6,296 | ) | 13,961 | ||||||||||||
Patents | 12,928 | (3,076 | ) | 9,852 | 11,647 | (2,445 | ) | 9,202 | ||||||||||||
Other | 6,452 | (3,099 | ) | 3,353 | 4,826 | (1,937 | ) | 2,889 | ||||||||||||
$ | 97,765 | $ | (57,700 | ) | $ | 40,065 | $ | 86,931 | $ | (43,329 | ) | $ | 43,602 | |||||||
Software development costs capitalized during 2006, 2005 and 2004 were $7.4 million, $13.4 million and $5.0 million, respectively, and related amortization was $9.1 million, $7.2 million and $6.6 million, respectively. Amortization of capitalized software development costs is computed on an individual product basis for those products available for market and is recognized based on the product’s estimated economic life, generally three years. Patents are amortized using the straight-line method over their estimated period of benefit, generally ten to seventeen years. Total intangible assets amortization expenses were $13.9 million, $10.7 million and $8.3 million for the years ended December 31, 2006, 2005 and 2004, respectively.
Capitalized software development costs, acquired technology, patents and other have weighted-average useful lives of 2.1 years, 4.1 years, 7.7 years and 3.7 years, respectively, as of the end of December 31, 2006. The estimated future amortization expense related to intangible assets as of December 31, 2006 is as follows:
Amount | |||||
---|---|---|---|---|---|
(in thousands) | |||||
2007 | $ | 13,044 | |||
2008 | 10,219 | ||||
2009 | 5,046 | ||||
2010 | 2,477 | ||||
2011 | 1,569 | ||||
Thereafter | 7,710 | ||||
$ | 40,065 | ||||
We established a valuation reserve in 2004 for the estimated total impairment of our $2.5 million cost-method investment in a start-up company. This impairment was based on our lack of expected recovery of our investment based on the start-up company’s lack of profitability.
The carrying amount of goodwill for 2005 and 2006 are as follows:
Amount | |||||
---|---|---|---|---|---|
(in thousands) | |||||
Balance as of December 31, 2004 | $ | 13,356 | |||
Acquisitions/purchase accounting adjustments | 39,177 | ||||
Divestitures | — | ||||
Balance as of December 31, 2005 | 52,533 | ||||
Acquisitions/purchase accounting adjustments | — | ||||
Divestitures | — | ||||
Foreign currency translation impact | 810 | ||||
Balance as of December 31, 2006 | $ | 53,343 | |||
The excess purchase price over the fair value of assets acquired is recorded as goodwill. In accordance with SFAS 142,Goodwill and Other Intangible Assets, goodwill is tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. Our annual impairment test was performed on April 6, 2006. No impairment of goodwill was identified during any of the periods presented.
The components of income before income taxes are as follows (in thousands):
Years Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2006 | 2005 | 2004 | |||||||||
Domestic | $ | 40,681 | $ | 40,460 | $ | 37,786 | |||||
Foreign | 54,621 | 40,220 | 27,027 | ||||||||
$ | 95,302 | $ | 80,680 | $ | 64,813 | ||||||
The provision for income taxes charged to operations is as follows (in thousands):
Years Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2006 | 2005 | 2004 | |||||||||
Current tax expense: | |||||||||||
U.S. federal | $ | 17,966 | $ | 11,022 | $ | 10,594 | |||||
State | 901 | 1,029 | 1,106 | ||||||||
Foreign | 5,190 | 3,725 | 3,300 | ||||||||
Total current | 24,057 | 15,776 | 15,000 | ||||||||
Deferred tax expense (benefit): | |||||||||||
U.S. federal | (1,233 | ) | 2,396 | 1,041 | |||||||
State | (90 | ) | (102 | ) | 121 | ||||||
Foreign | (140 | ) | 1,093 | 41 | |||||||
Total deferred | (1,463 | ) | 3,387 | 1,203 | |||||||
Total provision | $ | 22,594 | $ | 19,163 | $ | 16,203 | |||||
Deferred tax liabilities (assets) at December 31, 2006 and 2005 as follows (in thousands):
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2006 | 2005 | |||||||
Capitalized software | $ | 5,392 | $ | 6,288 | ||||
Unrealized gain on derivative instruments | — | 86 | ||||||
Depreciation and amortization | 9,071 | 8,598 | ||||||
Unrealized exchange gain | 2 | 1,238 | ||||||
Undistributed earnings of foreign subsidiaries | 10,313 | 4,410 | ||||||
Gross deferred tax liabilities | 24,778 | 20,620 | ||||||
Operating loss carryforwards | (34,154 | ) | (22,672 | ) | ||||
Intangibles | (85,684 | ) | (71,125 | ) | ||||
Vacation and other accruals | (3,783 | ) | (2,946 | ) | ||||
Inventory valuation and warranty provisions | (6,666 | ) | (9,043 | ) | ||||
Doubtful accounts and sales provisions | (1,328 | ) | (1,545 | ) | ||||
Intercompany profit | (3,242 | ) | (2,442 | ) | ||||
Deferred revenue | (2,613 | ) | — | |||||
Accrued rent expenses | (17 | ) | (17 | ) | ||||
Accrued legal expenses | (1,450 | ) | (12 | ) | ||||
Unrealized loss on derivative instruments | (149 | ) | — | |||||
10% minority stock investment | (906 | ) | (911 | ) | ||||
Stock-based compensation | (1,954 | ) | (563 | ) | ||||
Other | (691 | ) | (629 | ) | ||||
Gross deferred tax assets | (142,637 | ) | (111,905 | ) | ||||
Valuation allowance | 117,768 | 91,534 | ||||||
Net deferred tax liability (asset) | $ | (91 | ) | $ | 249 | |||
A reconciliation of income taxes at the U.S. federal statutory income tax rate to the effective tax rate follows:
Years Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2006 | 2005 | 2004 | |||||||||
U.S. federal statutory tax rate | 35 | % | 35 | % | 35 | % | |||||
Foreign sales corporation/ETI benefit | (1 | ) | (2 | ) | (3 | ) | |||||
Domestic production activities | (1 | ) | (1 | ) | — | ||||||
Foreign taxes more (less) than federal statutory rate | (11 | ) | (7 | ) | (6 | ) | |||||
Change in valuation allowance | — | (1 | ) | — | |||||||
Research and development tax credit | (1 | ) | (1 | ) | (1 | ) | |||||
Tax exempt interest | (1 | ) | (1 | ) | (1 | ) | |||||
State income taxes, net of federal tax benefit | 1 | 1 | 1 | ||||||||
Employee share-based compensation | 3 | — | — | ||||||||
Other | — | 1 | — | ||||||||
Effective tax rate | 24 | % | 24 | % | 25 | % | |||||
As of December 31, 2006, thirteen of our subsidiaries have available, for income tax purposes, foreign net operating loss carryforwards of an aggregate of approximately $214.4 million, of which $8.5 million expire during the years 2008 — 2013 and $205.9 million of which may be carried forward indefinitely. Our tax valuation allowance relates to the realizability of certain of these foreign net operating loss carryforwards and benefits of tax deductible goodwill in excess of book goodwill.
We maintain a manufacturing facility in Hungary. As a result of certain foreign investment incentives available under Hungarian law, the profit from our Hungarian operation is currently subject to a reduced income tax rate. Based on our capital investment in Hungary and current exemption limits which apply to this and any capital investments made through December 31, 2005, we currently expect this special tax status will terminate on or before December 31, 2008. The aggregate tax benefit of the exemption was $5.4 million and $3.4 million for the years ended December 31, 2006 and 2005, respectively.
In 2003, we restructured the organization of our manufacturing operation in Hungary. The tax deductible goodwill in excess of book goodwill created by this restructuring resulted in our being required to record a gross deferred tax asset of $91.0 million. The amortization of this excess tax deductible goodwill resulted in a $32.1 million and $20.1 million deferred tax asset for the associated net operating loss for the years ended December 31, 2006 and 2005, respectively. As of December 31, 2006 and 2005, the gross deferred tax asset related to the excess tax goodwill was $85.7 million and $71.1 million, respectively. Because we do not expect to have significant taxable income in the relevant jurisdiction in future periods to realize the benefit of these deferred tax assets, a valuation allowance for the entire amount of these deferred tax assets has been established.
We have not provided for U.S. federal income and foreign withholding taxes on approximately $111.8 million of certain non-U.S. subsidiaries’ undistributed earnings as of December 31, 2006. These earnings would become subject to taxes of approximately $36.5 million, if they were actually or deemed to be remitted to the parent company as dividends or if we should sell our stock in these subsidiaries. We currently intend to reinvest indefinitely these undistributed earnings.
In
(FASB ASC 280), we determine operating segments using the management approach. The estimated fair value amounts disclosed below have been determined using available market informationmanagement approach designates the internal organization that is used by management for making operating decisions and valuation methodologies described below. For certainassessing performance as the source of our financial instruments, including cashoperating segments. It also requires disclosures about products and cash equivalents, accounts receivable, accounts payableservices, geographic areas and accrued liabilities,major customers.
December 31, | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2006 | 2005 | |||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||
Short-term investments | $ | 150,190 | $ | 150,190 | $ | 119,846 | $ | 119,846 | ||||||
Other assets/liabilities: | ||||||||||||||
Forward contracts | (1,043 | ) | (1,043 | ) | 523 | 523 |
The fair values of short-term investments
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Net sales: | ||||||||||||
Americas: | ||||||||||||
Unaffiliated customer sales | $ | 292,999 | $ | 355,878 | $ | 331,482 | ||||||
Geographic transfers | 86,145 | 132,563 | 115,709 | |||||||||
379,144 | 488,441 | 447,191 | ||||||||||
Europe: | ||||||||||||
Unaffiliated customer sales | 210,188 | 267,373 | 230,940 | |||||||||
Geographic transfers | 189,076 | 204,282 | 159,992 | |||||||||
399,264 | 471,655 | 390,932 | ||||||||||
Asia Pacific: | ||||||||||||
Unaffiliated customer sales | 173,407 | 197,286 | 177,956 | |||||||||
Eliminations | (275,221 | ) | (336,845 | ) | (275,701 | ) | ||||||
$ | 676,594 | $ | 820,537 | $ | 740,378 |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Operating income: | ||||||||||||
Americas | $ | 46,816 | $ | 71,467 | $ | 76,292 | ||||||
Europe | 87,250 | 105,748 | 92,469 | |||||||||
Asia Pacific | 45,439 | 61,642 | 59,845 | |||||||||
Unallocated: | ||||||||||||
Research and development expenses | (132,974 | ) | (143,140 | ) | (126,515 | ) | ||||||
$ | 46,531 | $ | 95,717 | $ | 102,091 |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Interest income: | ||||||||||||
Americas | $ | 803 | $ | 2,603 | $ | 5,138 | ||||||
Europe | 727 | 3,291 | 4,485 | |||||||||
Asia Pacific | 99 | 102 | 199 | |||||||||
$ | 1,629 | $ | 5,996 | $ | 9,822 |
December 31, | ||||||||
2009 | 2008 | |||||||
Long-lived assets: | ||||||||
Americas | $ | 100,489 | $ | 107,701 | ||||
Europe | 36,555 | 39,280 | ||||||
Asia Pacific | 16,221 | 7,496 | ||||||
$ | 153,265 | $ | 154,477 |
We maintain a foreign-currency risk management strategy that uses derivative instruments (foreign currency forward and purchased options contracts) to protect our earnings and cash flows from fluctuations caused by the volatility in currency exchange rates. Movements in foreign-currency exchange rates pose a risk to our operations and competitive position, since exchange rate changes may affect our profitability and cash flow, and the business or pricing strategies of our non-U.S. based competitors.
Foreign currency fair value and cash flow hedges
The vast majority of our foreign sales are denominated in the customers’ local currency. We purchase foreign currency forward and purchased options contracts as hedges of forecasted sales that are denominated in foreign currencies and as hedges of foreign currency denominated receivables. These contracts are entered into to protect against the risk that the eventual dollar-net-cash inflows resulting from such sales or firm commitments will be adversely affected by changes in exchange rates.
We held forward contracts with notional amounts totaling $19.6follows (in thousands):
2010 | $ | 14,415 | ||
2011 | 9,898 | |||
2012 | 6,982 | |||
2013 | 4,611 | |||
2014 | 3,665 | |||
Thereafter | 12,130 | |||
$ | 51,701 |
We held forward contracts withU.S. patents. On January 30, 2003, a notionaljury found infringement by MathWorks of three of the patents involved and awarded us specified damages. On September 23, 2003, the District Court entered final judgment in favor of us and entered an injunction against MathWorks’ sale of its Simulink and related products and stayed the injunction pending appeal. Upon appeal, the judgment and the injunction were affirmed by the U.S. Court of Appeals for the Federal Circuit (September 3, 2004). Subsequently the stay of injunction was lifted by the District Court. In November 2004, the final judgment amount of $26.6$7.4 million which had been held in escrow pending appeal was released to us.
Goodwill | $ | 10,818 | ||
Acquired core technology | 5,201 | |||
Non-competition agreements | 159 | |||
Trademarks | 119 | |||
Customer relationships | 354 | |||
Current assets acquired | 3,057 | |||
Long-term assets acquired | 20 | |||
Current liabilities assumed | (486 | ) | ||
Deferred tax liabilities | (1,458 | ) | ||
Total assets acquired | $ | 17,784 |
As of December 31, 2006, $427,000 of deferred losses on cash flow hedges recorded in “Accumulated Other Comprehensive Income” are expected to be reclassified to earnings during the next twelve months. The actual foreign sales expected to occur over the next twelve months will necessitate the reclassifying to earnings of these derivative gains.
Hedge effectiveness of a foreign currency option contract designated as a cash flow hedge is measured by comparing the hedging instrument’s cumulative change in fair value from inception to maturity to the forecasted transaction’s terminal value. No amounts were excluded from the assessment of hedge effectiveness nor were there any amounts of ineffectiveness recorded in the consolidated statements of income for the years ended December 31, 2006 and 2005.
In accordance with SFAS 131,Disclosures about Segments of an Enterprise and Related Information, we determine operating segments using the management approach. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of our operating segments. It also requires disclosures about products and services, geographic areas and major customers.
While we sell our products to many different markets, management has chosen to organize the Company by geographic areas, and as a result has determined that we have one operating segment. Substantially all of the interest income, depreciation and amortization is recorded in the Americas. Net sales, operating income and identifiable assets, classified by the major geographic areas in which we operate,2009 are as follows (in thousands)thousands, except per share data):
Years Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2006 | 2005 | 2004 | |||||||||
Net sales: | |||||||||||
Americas: | |||||||||||
Unaffiliated customer sales | $ | 317,780 | $ | 275,524 | $ | 243,651 | |||||
Geographic transfers | 125,096 | 87,072 | 84,520 | ||||||||
442,876 | 362,596 | 328,171 | |||||||||
Europe: | |||||||||||
Unaffiliated customer sales | 193,364 | 171,499 | 164,895 | ||||||||
Geographic transfers | 159,369 | 125,650 | 99,958 | ||||||||
352,733 | 297,149 | 264,853 | |||||||||
Asia Pacific: | |||||||||||
Unaffiliated customer sales | 149,263 | 124,818 | 105,542 | ||||||||
Eliminations | (284,465 | ) | (212,722 | ) | (184,478 | ) | |||||
$ | 660,407 | $ | 571,841 | $ | 514,088 | ||||||
Years Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2006 | 2005 | 2004 | |||||||||
Operating income: | |||||||||||
Americas | $ | 67,644 | $ | 63,267 | $ | 53,472 | |||||
Europe | 78,402 | 61,790 | 55,705 | ||||||||
Asia Pacific | 54,771 | 40,996 | 38,211 | ||||||||
Unallocated: | |||||||||||
Research and development expenses | (113,095 | ) | (87,841 | ) | (84,692 | ) | |||||
$ | 87,722 | $ | 78,212 | $ | 62,696 | ||||||
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2006 | 2005 | |||||||
Identifiable assets: | ||||||||
Americas | $ | 476,027 | $ | 436,170 | ||||
Europe | 188,388 | 129,420 | ||||||
Asia Pacific | 56,805 | 42,746 | ||||||
$ | 721,220 | $ | 608,336 | |||||
Total sales outside
Three Months Ended | ||||||||||||||||
Mar. 31, 2009 | Jun. 30, 2009 | Sep. 30, 2009 | Dec. 31, 2009 | |||||||||||||
Net sales | $ | 157,799 | $ | 152,163 | $ | 165,035 | $ | 201,597 | ||||||||
Gross profit | 116,916 | 111,677 | 123,136 | 154,981 | ||||||||||||
Operating income | (2,479 | ) | 2,341 | 10,688 | 35,981 | |||||||||||
Net income | 358 | 4,430 | 9,931 | 2,366 | ||||||||||||
Basic earnings per share | $ | 0.00 | $ | 0.06 | $ | 0.13 | $ | 0.03 | ||||||||
Weighted average shares outstanding-basic | 77,277 | 77,556 | 77,653 | 77,589 | ||||||||||||
Diluted earnings per share | $ | 0.00 | $ | 0.06 | $ | 0.13 | $ | 0.03 | ||||||||
Weighted average shares outstanding-diluted | 77,436 | 77,824 | 78,103 | 78,325 | ||||||||||||
Dividends declared per share | $ | 0.12 | $ | 0.12 | $ | 0.12 | $ | 0.12 |
Three Months Ended | ||||||||||||||||
Mar. 31, 2008 | Jun. 30, 2008 | Sep. 30, 2008 | Dec. 31, 2008 | |||||||||||||
Net sales | $ | 192,918 | $ | 210,474 | $ | 215,038 | $ | 202,107 | ||||||||
Gross profit | 143,849 | 157,034 | 160,531 | 152,014 | ||||||||||||
Operating income | 18,065 | 27,834 | 27,946 | 21,872 | ||||||||||||
Net income | 17,616 | 24,734 | 23,159 | 19,318 | ||||||||||||
Basic earnings per share | $ | 0.22 | $ | 0.32 | $ | 0.29 | $ | 0.25 | ||||||||
Weighted average shares outstanding-basic | 78,840 | 78,484 | 78,834 | 78,110 | ||||||||||||
Diluted earnings per share | $ | 0.22 | $ | 0.31 | $ | 0.29 | $ | 0.25 | ||||||||
Weighted average shares outstanding-diluted | 79,825 | 79,549 | 79,841 | 78,522 | ||||||||||||
Dividends declared per share | $ | 0.11 | $ | 0.11 | $ | 0.11 | $ | 0.11 |
We have commitments under non-cancelable operating leases primarily for office facilities. Certain leases require us to pay property taxes, insurance and routine maintenance, and include escalation clauses. Future minimum lease payments as of December 31, 2006, for each of the next five years are as follows (in thousands):
2007 | $ | 7,241 | |||
2008 | 5,682 | ||||
2009 | 4,883 | ||||
2010 | 3,103 | ||||
2011 | 1,983 | ||||
Thereafter | 799 | ||||
$ | 23,691 | ||||
Rent expense under operating leases was approximately $8.7 million, $7.8 million and $6.5 million for the years ended December 31, 2006, 2005 and 2004, respectively.
As of December 31, 2006, we have non-cancelable purchase commitments with various suppliers of customized inventory and inventory components totaling approximately $7.0 million over the next twelve months.
As of December 31, 2006, we have outstanding guarantees for payment of customs and foreign grants totaling approximately $3.5 million.
We filed a patent infringement action on January 25, 2001 in the U.S. District Court, Eastern District of Texas (Marshall Division) claiming that The MathWorks, Inc. (“MathWorks”) infringed certain of our U.S. patents. On January 30, 2003, a jury found infringement by MathWorks of three of the patents involved and awarded us specified damages. On June 23, 2003, the District Court entered final judgment in favor of us and entered an injunction against MathWorks’ sale of its Simulink and related products and stayed the injunction pending appeal. Upon appeal, the judgment and the injunction were affirmed by the U.S. Court of Appeals for the Federal Circuit (September 3, 2004). Subsequently the stay of injunction was lifted by the District Court. In November 2004, the final judgment amount of $7.4 million which had been held in escrow pending appeal was released to us.
An action was filed by MathWorks against us on September 22, 2004, in the U.S. District Court, Eastern District of Texas (Marshall Division), claiming that on that day MathWorks had released modified versions of its Simulink and related products, and seeking a declaratory judgment that the modified products do not infringe the three patents adjudged infringed in the District Court’s decision of June 23, 2003, (and affirmed by the Court of Appeals on September 3, 2004). On November 2, 2004, MathWorks served the complaint on us. We filed an answer to MathWorks’ declaratory judgment complaint, denying MathWorks’ claims of non-infringement and alleging our own affirmative defenses. On January 5, 2005, the Court denied a contempt motion by us to enjoin the modified Simulink products under the injunction in effect from the first case. On January 7, 2005, we amended our answer to include counterclaims that MathWorks’ modified products are infringing three of our patents, and requested unspecified damages and an injunction. MathWorks filed its reply to our counterclaims on February 7, 2005, denying the counterclaims and alleging affirmative defenses. On March 2, 2005, we filed a notice of appeal regarding the Court’s denial of the contempt motion. On March 15, 2005, the Court stayed MathWorks’ declaratory judgment action, pending a decision on the appeal by the Court of Appeals for the Federal Circuit. On February 9, 2006, the Court of Appeals for the Federal Circuit affirmed the District Court’s January 2005 order. On November 22, 2006, the District Court lifted the stay. The case schedule has yet to be set in this action. During the fourth quarter of 2004, we accrued $4 million related to our probable loss from this contingency, which consists entirely of anticipated patent defense costs that are probable of being incurred. In the fourth quarter of 2006, we accrued an additional $600,000 related to this contingency. We charged approximately $57,000 against this accrual during the fourth quarter of 2006. We have charged a total of $602,000 against this accrual through December 31, 2006.
On January 31, 2005, we acquired all of the common stock of Toronto, Canada-based Electronics Workbench, a supplier of electronics design automation software. The acquisition was accounted for as a purchase. The purchase price of the acquisition, subject to adjustment as provided for in the purchase agreement, was $12.1 million in cash. We funded the purchase price from existing cash balances. Our consolidated financial statements include the operating results from the date of acquisition. Pro-forma results of operations have not been presented because the effects of those operations were not material. In accordance with SFAS 141, Business Combinations, the total purchase consideration has been allocated to the assets acquired and liabilities assumed, including identifiable intangible assets, based on their respective estimated fair values at the date of acquisition.
On April 29, 2005, we acquired the operating assets of Measurement Computing Corporation (MCC), a provider of low-cost data acquisition products. The acquisition was accounted for as a purchase. We acquired the operating assets of MCC, which included the legal positions of MCC and SoftWIRE in litigation against us. As a result of the asset acquisition, a pending legal action was dismissed with prejudice and we eliminated our remaining $1.9 million accrual for patent defense costs related to MCC. The gain that resulted from the elimination of the accrual was recorded in general and administrative expenses. The purchase price of the acquisition, subject to adjustment as provided for in the purchase agreement, was $33.2 million in cash. We funded the purchase price from existing cash balances. Our consolidated financial statements include the operating results from the date of acquisition. Pro-forma results of operations have not been presented because the effects of those operations were not material. In accordance with SFAS 141, the total purchase consideration has been allocated to the assets acquired and liabilities assumed, including identifiable assets, based on their respective estimated fair values at the date of acquisition.
On October 17, 2005, we acquired the operating assets of IOtech, Inc., a provider of PC-based data acquisition and instrumentation products. The acquisition was accounted for as a purchase. The purchase price of the acquisition, subject to adjustment as provided for in the purchase agreement, was $17.6 million in cash. We funded the purchase price from existing cash balances. Our consolidated financial statements include the operating results from the date of acquisition. Pro-forma results of operations have not been presented because the effects of those operations were not material. In accordance with SFAS 141, the total purchase consideration has been allocated to the assets acquired and liabilities assumed, including identifiable assets, based on their respective estimated fair values at the date of acquisition.
Goodwill is deductible for tax purposes. Goodwill is not amortized but is reviewed periodically for impairment. Acquired core technology and intangible assets are amortized over their useful lives, which range from three to eight years. Amortization expense for intangible assets acquired was approximately $3.2 million and $2.0 million for 2006 and 2005, respectively, of which approximately $2.7 million and $1.5 million was recorded in cost of sales and approximately $490,000 and $490,000 was recorded in operating expenses. The estimated amortization expense of intangible assets acquired for the current fiscal year and in future years will be recorded in the consolidated statements of income as follows (in thousands):
Fiscal Year | Cost of Sales | Acquisition related costs and amortization, net | Total | ||||||||
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2007 | $ | 2,689 | $ | 450 | $ | 3,139 | |||||
2008 | 2,532 | 412 | 2,944 | ||||||||
2009 | 2,259 | 338 | 2,597 | ||||||||
2010 | 1,725 | 177 | 1,902 | ||||||||
Thereafter | 1,166 | 271 | 1,437 | ||||||||
Total | $ | 10,371 | $ | 1,648 | $ | 12,019 | |||||
During 2002, we contributed approximately $3.6 million to the National Instruments Foundation, a 501(c)(3) charitable foundation established in 2002 for the purpose of continued promotion of scientific and engineering research and education at higher education institutions worldwide. This contribution was recorded as general and administrative expense in 2002. Two of the four directors of the National Instruments Foundation are current officers of National Instruments.
The following quarterly results have been derived from unaudited consolidated financial statements that, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of such quarterly information. The operating results for any quarter are not necessarily indicative of the results to be expected for any future period. The unaudited quarterly financial data for each of the eight quarters in the two years ended December 31, 2006 are as follows (in thousands, except per share data):
Three Months Ended | ||||||||||||||
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Mar. 31, 2006 | Jun. 30, 2006 | Sep. 30, 2006 | Dec. 31, 2006 | |||||||||||
Net sales | $ | 154,752 | $ | 160,123 | $ | 164,079 | $ | 181,453 | ||||||
Gross profit | 113,247 | 119,271 | 121,648 | 135,915 | ||||||||||
Operating income | 15,826 | 20,911 | 22,367 | 28,616 | ||||||||||
Net income | 12,602 | 17,021 | 18,651 | 24,434 | ||||||||||
Basic earnings per share | $ | 0.16 | $ | 0.21 | $ | 0.23 | $ | 0.31 | ||||||
Weighted average shares outstanding-basic | 79,053 | 79,611 | 79,637 | 79,767 | ||||||||||
Diluted earnings per share | $ | 0.15 | $ | 0.21 | $ | 0.23 | $ | 0.30 | ||||||
Weighted average shares outstanding-diluted | 81,608 | 81,653 | 81,274 | 81,524 | ||||||||||
Dividends declared per share | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.06 |
Three Months Ended | ||||||||||||||
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Mar. 31, 2005 | Jun. 30, 2005 | Sep. 30, 2005 | Dec. 31, 2005 | |||||||||||
Net sales | $ | 129,740 | $ | 140,822 | $ | 141,618 | $ | 159,661 | ||||||
Gross profit | 97,376 | 104,109 | 103,725 | 117,322 | ||||||||||
Operating income | 14,182 | 19,093 | 18,343 | 26,594 | ||||||||||
Net income | 11,136 | 15,024 | 14,399 | 20,958 | ||||||||||
Basic earnings per share | $ | 0.14 | $ | 0.19 | $ | 0.18 | $ | 0.27 | ||||||
Weighted average shares outstanding-basic | 79,175 | 78,303 | 78,158 | 78,505 | ||||||||||
Diluted earnings per share | $ | 0.14 | $ | 0.19 | $ | 0.18 | $ | 0.26 | ||||||
Weighted average shares outstanding-diluted | 81,924 | 80,190 | 80,575 | 80,821 | ||||||||||
Dividends declared per share | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 |
On January 30, 2007, our Board of Directors declared a quarterly cash dividend of $0.07 per common share, payable March 5, 2007, to shareholders of record on February 12, 2007.
On January 30, 2007, our Board of Directors granted authorization for the repurchase of an additional 1,522,106 shares of our common stock under our share repurchase plan.
Year | Description | Balance at Beginning of Period | Provision for Bad Debt Expense | Write-Offs Charged to Allowances | Balance at End of Period | ||||||||||||
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2004 | Allowance for doubtful accounts and sales returns | $ | 3,244 | $ | 596 | $ | 329 | $ | 3,511 | ||||||||
2005 | Allowance for doubtful accounts and sales returns | 3,511 | 1,462 | 239 | 4,734 | ||||||||||||
2006 | Allowance for doubtful accounts and sales returns | 4,734 | 33 | 407 | 4,360 |